AFRICAN Development Bank (AfDB) has advised African states to avoid plunging into debt in a quest to meet fiscal obligations currently affected by low revenue on the back of falling commodity prices.
AfDB president Akinwuni Adesina said a number of countries in Africa have in the past few years issued sovereign bonds amounting to US$26 billion, posing a challenge of high cost of financing the foreign currency dominated debt.
Zambia issued three eurobonds on the international market at US$700 million, US$1billion and US$1.25 billion.
“Africa must not get into debt crisis. Increasingly, many African countries, taking advantage of the low global interest rates, rushed to the international capital markets by issuing bonds…With rising interest rates, African countries now face a challenge of high cost of financing debt,” he said.
Speaking at the official opening of the AfDB annual general meetings being held here under the theme , ‘Energy and climate change’ Dr Adesina said there is need for urgent measures to ensure macroeconomic stabilisation, fiscal consolidation, broadening of the tax base and deepening of the capital markets.
Dr Adesina said African countries should mobilise domestic resources for development.
He said the continent has several financing sources that can effectively contribute to economic transformation of many countries.
“[States] should leverage sovereign wealth funds which stand at US$162 billion, domestic tax revenue estimated at US$500 billion annually, private equity fund which stand at US$20 billion per year, and pension funds estimated at US$334billion,” he said.
He also said Africa needs to combat illicit capital flows estimated to be over US$60 billion annually and prevent the continent from achieving its growth targets.
Meanwhile, Dr Adesina has emphasised that Africa remains resilient despite economic challenges being experienced by some countries.
“Africa is not falling apart. The Africa rising story remains strong,” he said.