The African Development Bank is set to present a groundbreaking initiative at this year's African Union Summit to address the continent's pressing liquidity needs for debt refinancing.
The proposed African Financing Stability Mechanism (AFSM), created to ensure financial stability and sustainable development across Africa, is expected to be endorsed and adopted by the continent's leaders during the Summit.
The 38th Ordinary Session of Heads of State and Government is taking place from 15-16 February 2025 in Addis Ababa, Ethiopia, under the theme "Advancing Africa's Development Agenda."
Africa remains the only continent without a dedicated regional financial mechanism to mitigate debt refinancing risks. "Africa, therefore, needs a regional safety net to provide affordable debt refinancing liquidity at scale," said African Development Bank President Akinwumi Adesina in a foreword to the AFSM report.
Since 2010, Africa's public debt has nearly doubled, with many nations increasingly relying on non-concessional and short-term borrowing, leading to widespread debt defaults. The Bank estimates Africa's short-term debt retirement or refinancing needs at $10 billion yearly over the next decade. Access to financial markets remains a key challenge for African countries, which often face significantly higher liquidity-access premiums compared to other regions. This is due to domestic economic factors and external financial conditions.
The push for the AFSM began in 2022 when the African Development Bank proposed the idea, leading to a formal mandate from the African Union Assembly of Heads of State and Government to establish the mechanism. Over the past two years, the Bank and the African Union Commission have engaged in extensive research and consultations with member states
Dr Adesina, who is leading a delegation of the Bank's senior management team to the Summit, will preside over the launch of the AFSM on 15 February, for which he has been a staunch advocate.
On the sidelines of the Summit, the Bank launched the 2025 edition of its Africa's Macroeconomic Performance and Outlook (MEO) report on Friday, showing a balance of improved performance of countries and the persistence of risks amid global shocks. Real GDP growth is projected to accelerate to 4.1 per cent in 2025 and 4.4 per cent in 2026, driven by economic reforms, declining inflation, and improved fiscal and debt positions. However, the report found that geopolitical tensions, structural weaknesses, climate-related disasters, and prolonged conflicts in regions such as the Sahel and the Horn of Africa continue to pose significant challenges.
Other key events being organized by the Bank and partners include a session on Progress Made in High-Level Political Commitments to Address Malnutrition in Africa by the African Leaders for Nutrition, as well as the 8th Africa Business Forum (ABF 2025) under the theme "From Potential to Prosperity: Activating Africa's Regional Value Chains."
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