The African Development Bank (AfDB) has approved a new borrowing policy to help the poorest African states survive a debt burden and vulnerabilities linked to economic shocks.
The Sustainable Borrowing Policy will replace the previous Non-Concessional Debt Accumulation (NCDA) policy, with emphasis on transparency in debt management and coordination and partnership with other multilateral banks.
In a statement Thursday, the AfDB said the policy targets recipients of the African Development Fund – the bank’s concessional window, which brings together 37 of the 54 regional member countries of AfDB.
The new policy is meant to “address cross-subsidisation of concessional financing with non-concessional financing as well as debt limit policies.”
The bank will introduce Agreed Policy Actions linked to debt management and transparency in its dialogue with RMCs to promote effective management and transparency in use of public debt. “In consultation with beneficiaries, emphasis will be put on harmonisation with the World Bank Policy and Performance Actions and debt limits under the IMF Debt Limit Policy,” the policy reads.
The AfDB says this policy will help address the growing debt crisis among African states that has partly been exacerbated by economic shocks.
Kenya, for example, intends to raise its debt ceiling from the current Ksh9 trillion ($78.8 billion) to Ksh13 trillion ($113.8 billion), the second raise in less than three years, to bridge a budget deficit of Ksh846 billion ($7.48 billion) in the coming financial year.
At the same time, the World Bank last week warned that Tanzania’s risk of debt distress rating worsened from low to moderate, after its national debt increased by $132 million to reach $37.57 billion in just one month.