Abuja: The African Development Bank (AfDB) has advised African countries, including Nigeria, to ensure that borrowed funds are invested in productive assets capable of generating economic growth and improving living standards. Prof Kevin Urama, AfDB’s Chief Economist/Vice President for Economic Governance and Knowledge Management, gave the advice in an interview with the News Agency of Nigeria (NAN) Abuja.
According to News Agency of Nigeria, Urama discussed debt sustainability and financing challenges facing African economies. He emphasized that the issue was not necessarily the volume of debt accumulated by countries but the quality of debt, its terms, and how borrowed resources were utilized. Urama highlighted that the focus should be on the quality of debt, questioning what is borrowed, the source, the terms of the loans, and the purpose for which the money is used.
He noted that debt becomes sustainable when it is channeled into productive investments that expand economic output, create jobs, and improve infrastructure. The AfDB chief economist warned that excessive borrowing without corresponding productive investments could weaken labor productivity and overall economic performance.
He pointed out that findings in the African Economic Outlook indicated that countries with high debt-to-GDP ratios often experienced declining debt productivity, which in turn affected labor and capital productivity. Urama cautioned against financing long-term infrastructure projects with expensive short-term commercial loans, as such practices could create refinancing pressures and heighten fiscal risks.
Urama urged African countries to pay greater attention to debt productivity by ensuring that citizens see tangible benefits from borrowed funds through improved infrastructure and public services. He also called for stronger support for African-led financial initiatives, including the African Financing Stability Mechanism, which aims to help countries address debt refinancing challenges within the continent.
He stressed that African countries need to strengthen cooperation and develop home-grown solutions to reduce vulnerability to external shocks and financial market volatility.