ADDIS ABABA – African countries will have to manage their finances carefully to repay dollar debt raised in recent years as weak currencies push up servicing costs and oil and commodity revenues tumble, the new head of the African Development Bank said.
From oil-rich Nigeria and copper producing Zambia to fast-growing Rwanda and Ghana, African nations have taken advantage of historically low yields and strong investor appetite to issue Eurobonds or raise other funds on international markets.
Africa’s foreign currency bond issues between 2000 to 2014 totalled $20.5 billion, with $7.4 billion of that raised in 2014 alone, Akinwumi Adesina, who took over as president of the 50-year-old AfDB in September, told Reuters in an interview.
“You are going to be financing high-cost debt using a devalued currency — it just means it is more difficult for you to finance your debt,” he said in Addis Ababa late on Tuesday.
“One does have to make sure that it is within sustainable debt limit. We have to manage our finances well.”
An expected interest rate hike by the U.S. Federal Reserve has strengthened the dollar globally and hit emerging market currencies, including in Africa, where many governments are also feeling the squeeze from low commodity and oil revenues.
A development economist with a doctorate from Purdue University in the United States, 55-year-old Adesina was elected in May to head the Ivory Coast-based institution for five years.
In Addis Ababa for talks with African Union Commission head Nkosazana Dlamini-Zuma and Ethiopian Prime Minister Hailemariam Desalegn, he urged African states to manufacture more rather than rely so heavily on volatile raw commodity exports.
“I personally believe that the way to address this is to first and foremost make sure that African countries stop exporting primary commodities. I have not seen any country in the world that has prospered from this,” he said.
“African countries need to develop value chains whether it is in oil and gas, minerals or metals, or whether it is agriculture – everything that Africa has,” he added.
Adesina said greater trade within Africa, which now stands at 10 percent of total trade on the continent, would help reduce exposure to global fluctuations.
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