The African Development Bank (AfDB) is set to launch a new regional refinancing facility aimed at helping African nations struggling with maturing international debt. This facility, known as the African Financial Stability Mechanism (AFSM), is expected to be activated soon, following the anticipated approval from heads of state at the African Union summit in mid-February.
The initiative has already received approval from African finance ministers and is now awaiting the final sign-off from the continent’s political leaders. Once operational, the AFSM will offer loans at concessional rates to countries facing high refinancing risks, as many African nations are due to repay a combined $20 billion annually over the next three years.
AfDB President Akinwumi Adesina highlighted the urgent need for such a facility, noting that the facility would provide critical financial support to countries facing significant fiscal pressures. However, the financial assistance will come with conditions—beneficiaries will need to implement specific macroeconomic and fiscal reforms to ensure long-term stability.
The creation of the AFSM comes at a crucial time as many African nations grapple with growing debt burdens, worsened by the economic fallout from the COVID-19 pandemic and rising global inflation. The facility is seen as a vital tool in providing countries with breathing room while they work to manage their debt obligations and stabilize their economies.
Once approved, the AFSM is expected to play a key role in bolstering financial stability across the continent, supporting countries in managing their fiscal challenges and promoting sustainable economic growth.
