The head of the African Development Bank, Mr. Akinwunmi Adesina, has urged African countries to put an end to natural resource-backed loans citing credible issues with such loans in the long term.
Speaking in an interview with the Associated Press, Mr. Adesina called the natural resource type deals bad and pointed to a bank initiative that helps to renegotiate them.
According to Mr. Adesina, the increase in the type of loans for African countries is driven by the shift to renewable energy and electric vehicles causing a spike in demand for critical minerals.
Mr. Adesina cited the long-term issues, and the damage natural-resource-backed loans bring to the recipient countries.
Mr. Adesina whose AFDB institution based in Abidjan, Ivory Coast helps finance development for African countries highlighted the issue with natural resource-backed loans.
He stressed the uneven nature of the negotiations with the lenders usually having the upper hand and dictating the terms to the recipient African countries.
These unequal terms and power imbalance coupled with a lack of transparency create a fertile ground for exploitation, Mr. Adesina said.
These are the key issues with natural-resource-backed loans and why African countries must put an end to it.
Additionally, Mr. Adesina said that Natural resource-backed loans pose a challenge for development banks like his and the International Monetary Fund, which promote sustainable debt management.
Recipient African countries might struggle to get or repay loans from the AFDB and IMF because they have to use the income from their natural resources which are often crucial to their economies to pay back Natural resource-backed loans.
