Debt for growth is not a bad thing – AfDB

The African Development Bank’s Chief Economist, Kevin Urama, says debt for growth for countries on the continent should not carry any negative connotation.

Urama, also the Vice-President Governance and Knowledge Management in AfDB, said this at a pre-media conference held virtually to herald the 2024 AfDB Annual Meetings.

According to him, the debt to GDP ratio in Nigeria is still sustainable, but the issue in Nigeria is with regards to debt to revenue ratio.

He, however, commended President Bola Tinubu-led administration for its various efforts geared towards revenue mobilisation improvement in the country.

Urama said that by increasing the revenue mobilisation, the country would be able to rebalance that ratio and move forward.

“The point I need to make clearly is that debt is not a bad thing. Debt for growth is always the means for driving transformative growth in countries.

“The issue is not about the debt. It is about the quality of the debt. In terms of what you borrow, on what terms, how transparent they are, and what you use the resources borrowed to do

“If it is invested in growth enhancing infrastructure and productive infrastructure, you are going to be able to generate revenue to be able to repay the loans and still also grow your economy,” he said.

According to Urama, debt should not ordinarily carry negative connotations, only bad should debt causes such.

“So when you borrow on wrong terms , when it is not transparent and people don’t know what is happening.

“And when the resources are not used properly , then you can get into the debt sustainability challenge,” he said.

The vice-president said the Public Financial Management Academy of the bank was, however, established to help countries not to get there.

“So when you are borrowing, you know exactly when, who, what terms and how to use those loans in order to be able to drive transformative growth in countries,”Urama said.