AFD Chief Urges African Nations to Borrow Locally to Avoid Bias

LAGOS (Capital Markets in Africa) — African nations should tap more domestic savings for their funding needs and develop their own financial markets to avoid the complications and “bias” that comes with raising international debt.

That’s according to Agence Française de Developpement Chief Executive Officer Remy Rioux, who is urging sovereign borrowers to turn to long-term, concessional financing rather than rely on short-term, expensive credit from private institutions.

Part of the risk premium attached to African debt is structural and could be reduced by providing more information to markets through credit-rating agencies, he said. Ghana’s Finance Minister Ken Ofori-Atta in July said African borrowers are treated unfairly, where serial defaulters like Argentina are able to raise funding at the same rates as African countries.

“There is a bias, certainly, in the way, the rest of the world is looking at the continent,” Rioux said.

AFD is prioritizing financing for health projects and small businesses, through micro financiers and public development banks for 2020, he said, adding that it won’t be at the expense of infrastructure and agriculture.

The French-based lender provides about 7 billion euros ($8.3 billion) of funding, which represents half of its total annual financial commitments, to about 500 projects on the continent.

As part of its partnership with other agencies, AFD will disburse 2 billion euros this year to development banks and other financial entities globally.

Source: Bloomberg Business News