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Watch the quality of debt you contract, advises AfDB

THE African Development Bank (AfDB) has advised member countries to tackle rising debt on the continent.

Launching this year’s African Economic Outlook in Abidjan, Ivory Coast on Thursday, AfDB president Akinwumi Adesina called for prudent debt management.

Although Africa’s current debt stock stands at US $500 billion, Dr Adesina assured that it was not a desperate situation.

“We must tackle rising debt levels. Total debt stock (external and domestic) currently stands at $500 billion. Median debt to GDP (gross domestic product) has risen from 38 per cent in 2008 to 54 per cent in 2018. But there is no need for the panic button,” he said. “Let me be clear: Africa does not have a systemic debt crisis. 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.”

Dr Adesina urged member states to rely more on local resource mobilisation as opposed to external sources.

“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,” Dr Adesina said. “The bulk of the debt is actually 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.”

He said physical infrastructure, while important, was not enough to drive growth and productivity of African economies. 

Dr Adesina said African countries should accelerate investments as well in the development of human capital. 

“Youth unemployment must be given top priority. With 12 million graduates entering the labour market each year and only three million of them getting jobs, the mountain of youth unemployment is rising annually,” said Dr Adesina. “Given the fast pace of changes, driven by the 4th industrial revolution – from artificial intelligence, to robotics, machine learning, quantum computing – Africa must invest more in redirecting and reskilling its labour force, and especially the youth, to effectively participate. The youth must be prepared for the jobs of the future – not the jobs of the past.”

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