High borrowing rates cripple Africa’s development, leaders say

African leaders attending a major economic gathering in Kenya this week have called for urgent reform of the global financial system, which they consider “unjust” and a barrier to the continent’s development.

These calls come as African nations grapple with high debt levels and unstable exchange rates, hindering their economic growth.

The African Development Bank (AfDB) predicts a 3.7% growth for the continent this year, respectable in the global context, but insufficient considering population increase.

Kenyan President William Ruto emphasizes the need for “vast financial resources” to achieve “Africa’s transformation,” the theme of the AfDB meeting.

However, he criticizes the existing financial system as “misaligned” with Africa’s aspirations.

A key point of contention is the high borrowing rates African countries face. Ruto claims they pay “eight to 10 times more” compared to other regions, creating an “unjust” system.

He cites Kenya’s recent Eurobond issuance with a 10% interest rate, while France borrows at just 3%.

AfDB President Akinwumi Adesina echoes these concerns, criticizing the “Africa risk premium” that forces African nations to pay more despite similar credit ratings to other countries.

He estimates that a fairer assessment could save Africa $75 billion annually in debt servicing alone.

Despite these challenges, Adesina remains optimistic, forecasting a real GDP growth of 3.7% for Africa this year, rising to 4.3% in 2025.

However, President Ruto warns that Africa’s development “remains far behind its potential” due to the current financial system.

These leaders’ calls for reform highlight the need for a global financial architecture that fosters more equitable development opportunities for Africa.

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