By: Babajide Okeowo
The rising debt profile of Nigeria and other African countries has forced the African Development Bank (AfDB) to launch the African Debt Managers Initiative Network (ADMIN) to spur domestic solutions to the continent’s debt challenges.
The inaugural and first peer learning event recently took place in Addis Ababa with the theme: Developing and Deepening Domestic Debt Markets in Africa
Speaking about the initiative, AfDB Director, Coulibaly Abdoulaye said that the network will provide tailored and in-house developed solutions to address the continent’s debt challenges.
He said the network will also strengthen the debt management capacity of officials and institutions of African countries to quickly resolve the debt challenges facing these countries, restore macroeconomic stability and support inclusive growth, as well as encourage the exchange of experiences among debt managers in the region . member countries.
Director of the African Development Institute, Eric Ogunleye, said that the increasing need for funding for infrastructure development, poverty alleviation, climate change mitigation and addressing insecurity is pushing African countries to increase their borrowing, further increasing debt vulnerability.
He said rising debt vulnerabilities and weak debt management capacities in many African countries continue to worsen macroeconomic outcomes and hinder effective policy responses to shocks, thereby exacerbating debt stress in some countries.
“Therefore, there is a growing need to strengthen debt management capacity in African countries,” Ogunleye told participants.
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As of April 30, 2024, of the 38 African countries that have debt sustainability assessment data, 13 countries are at high risk of debt distress and 6 countries are already in debt distress, Ogunleye said. Most of Africa’s debt is now held by external bondholders and creditors outside the Paris Club with direct ties to debtor countries; This high-cost debt creates a significant debt service burden in African countries, which on average reaches 18 percent of total government revenue, he explained.
The meeting highlighted how developing Africa’s domestic debt markets has been identified as a way in which the continent can develop cheaper and more stable sources of debt financing for its development needs.
Discussions focused on sound debt management frameworks, networking and peer learning to support the development and deepening of domestic debt markets in Africa to promote debt sustainability.
Former Director of Debt Management at the South African Department of Finance, Johan Krynauw, encouraged African countries to work together more closely to encourage knowledge exchange and support each other on debt management issues.
“In recent years, there have been many institutional initiatives from outside the continent to help African countries. “The question is always why this didn’t work, and why we still face public finance and debt management problems today,” said Krynauw.
Africa has reached a stage where they have enough skills, knowledge and experience to determine what works for their countries.
“Context is important and we need to find solutions to local problems. That’s one of the reasons why this initiative was created so that public debt managers in Africa can work together. The question is where African debt managers can work together,” Krynauw said.
Jean Yves Naka, Director of Research and Strategy at the Bourse Régionale des Valeurs Mobilières or BRVM, the regional stock exchange of the West African Monetary Union, underscored the importance of the domestic market.
“Debt vulnerability remains a major challenge for African countries, especially in achieving development goals such as the UN Sustainable Development Goals and the African Union’s Agenda 2063 (https://apo-opa.co/4aZ03U9). However, developing Africa’s domestic debt markets is one way to better address this situation,” he said.
The session was attended by debt managers and heads of debt management offices in Africa, capital market operators, commercial bankers, and regulators, including securities and exchange commissions and central banks. They share practical ways to develop and deepen domestic debt markets on the continent and offer lessons for countries with new or existing domestic debt markets to consider how to develop or deepen domestic debt markets.
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