Africa’s Total Debt Stock Stands at $500bn—AfDB

By Adedapo Adesanya

**Projects 4% Economic Growth

Amid a rising debt profile on the continent, Africa’s economy is expected to rise to about 4 percent this year and the next, driven by infrastructure investments and natural resource exports, the African Development Bank (AfDB) has revealed.

President of the lender, Mr Akinwumi Adesina, said during the presentation of the African Economic Outlook 2020 at the bank’s headquarters in Abidjan on Thursday, January 30 that Africa’s economic growth remained stable in 2019 at 3.4 percent and is expected to move to 3.9 percent in 2020 and 4.1 percent in 2021.

The slower than expected growth is partly due to the moderate expansion of the continent’s top five economies — Algeria, Egypt, Morocco, Nigeria, and South Africa – whose joint growth was an average rate of 3.1 percent, compared with the average of 4.0 percent for the rest of the continent.

According to the report, East Africa was still the continent’s fastest-growing region, with average growth estimated at 5.0 percent in 2019; North Africa was the second fastest, at 4.1 percent, while West Africa’s growth rose to 3.7 percent in 2019, up from 3.4 percent the year before.

Central Africa grew at 3.2 percent in 2019, up from 2.7 percent in 2018, while Southern Africa’s growth slowed considerably over the same period, from 1.2 percent to 0.7 percent, dragged down by the devastating natural disasters such as cyclones Idai and Kenneth.

Speaking on Africa’s total debt stock, the bank said both external and domestic debt currently stands at $500 billion. According to Mr Adesina, the Median Debt to Gross Domestic Product (GDP) had risen from 38 percent ten years ago to 54 percent in 2018.

The AfDB president, however, added that in spite of this development, there was no need for panic though there was need to tackle rising debt levels through the necessary efforts

“However, we must watch the quality of debt, the mix of debt in terms of concessional and non-concessional, the potential negative effects of rising domestic debt in crowding out private sector access to finance, the increasing level of non-Paris Club bilateral debt, and rising volumes of Euro bonds.

“While there is no cause for alarm, greater prudence is needed. We all must now collectively focus on sustainable debt management and greater reliance on domestic resource mobilisation to finance rising fiscal deficits.

Mr Adesina explained that the bulk of the debt was spent on infrastructure, which remains a major challenge for many countries.

“Governments can improve the cost effectiveness of their expenditures on infrastructure by sharply focusing on quality infrastructure, improved efficiency of public expenditure on infrastructure, while promoting greater participation of private sector in the provision of infrastructure.

“Physical infrastructure, while important, is not enough to drive much needed greater growth and productivity of African economies. African countries should accelerate investments as well in the development of human capital” he advised.

The report also said that higher oil prices were a significant contributor to growth last year. However, it added that only a third of countries have achieved inclusive growth and that, based on current trends, Africa is not on track to meet an international goal of eradicating extreme poverty by 2030.