African nations are pushing for a recalibration of Gross Domestic Product (GDP) calculations to better reflect their vast natural wealth, an initiative led by the African Development Bank (AfDB).
The proposal aims to improve debt metrics and ease borrowing pressures that have contributed to economic crises across the continent in recent decades.
AfDB President Akinwumi Adesina emphasized the urgency of the matter, stating that the issue will be presented at major international summits, including G7 and G20 meetings.
“I expect others to recognize that it is time to begin to change the valuation of African economies,” Adesina said at a recent conference in Tanzania.
Africa, which covers 20 per cent of the world’s land surface, is home to a quarter of all mammal species and one-fifth of bird species, according to United Nations estimates.
It also contains one-sixth of the world’s remaining forests, which play a crucial role in capturing carbon emissions. The AfDB argues that these ecological assets should be incorporated into GDP assessments, potentially enhancing African economies’ financial standing.
The AfDB estimates that Africa’s total GDP in 2018, valued at $2.5trn, was significantly lower than its estimated natural capital of $6.2trn, which includes forests, fish stocks, and mineral reserves such as lithium. Recognizing these resources could improve debt-to-GDP ratios, which investors use to assess creditworthiness and borrowing risks.
However, concerns persist over whether recalibrating GDP would significantly impact investor confidence or reduce borrowing costs.
“You can take more money, but the question is, can you pay more? If you are not able to pay more, then there will be a problem,” said Kariuki Ngari, CEO of Standard Chartered Kenya.
African countries often face higher borrowing costs due to their lower credit ratings. Nigeria and Kenya, for instance, issued dollar bonds last year with interest rates of around 10 per cent, while advanced economies such as the United States secured rates below 5 per cent.
The continent’s total external debt has surged from $150bn to approximately $500bn over the past 15 years, according to the World Bank.
The recalibration issue is expected to feature prominently during South Africa’s G20 presidency this year, with finance officials scheduled to meet in February. African leaders are also expected to discuss the proposal at the African Union summit in Ethiopia that same month.
The campaign to reassess Africa’s GDP is also linked to climate finance. “Exorbitant capital costs mean that a continent with the potential to be a renewable powerhouse accounts for less than 1 per cent of global installed solar capacity,” said Amina Mohammed, Deputy Secretary-General of the United Nations.
Despite support from leaders such as Kenya’s President William Ruto and Denis Sassou Nguesso of the Republic of the Congo, commitments from wealthy nations and international financial institutions remain uncertain.
The World Bank has long published reports highlighting the significance of natural resources in economic assessments, with its latest findings showing that renewable natural assets constitute about 6 per cent of global GDP.
China, Africa’s largest bilateral creditor, has expressed support for the initiative, calling for a reassessment of GDP calculations to account for the continent’s ecological wealth, according to Reuters.
Zambia, which recently completed a debt restructuring process, has also backed the initiative. “We dealt with the debt burden,” said Zambian President Hakainde Hichilema, stressing the urgent need for funding to expand electricity access. “We don’t have the time.”
The success of the AfDB-led push for GDP recalibration will depend on international recognition and the establishment of mechanisms to monetize Africa’s natural wealth. While significant challenges remain, proponents argue that redefining economic metrics could unlock new financial opportunities and reshape Africa’s position in the global economy.
