RESOURCE-BACKED LOANS AND PUBLIC SECTOR COLLATERALISATION OF NATURAL RESOURCES IN AFRICAN COUNTRIES

This policy brief by the African Forum and Network on Debt and Development examines resource-backed loans (RBLs) and the collateralisation of mineral resources in African countries. It explores how these financial mechanisms can unlock infrastructure funding for resource-rich but capital-poor nations, while warning of significant risks including debt sustainability crises, lack of transparency, and the erosion of competitive public procurement processes.

• Resource-backed loans (RBLs) are complex financial arrangements where natural resources serve as a direct repayment source, a guarantee, or collateral. They link two typically separate supply chains: infrastructure construction and resource extraction.
• Properly structured RBLs can mitigate corruption and the diversion of funds common in traditional sovereign loans by allocating funding directly to construction companies and using independent escrow accounts for debt servicing, thereby bypassing government control.
• RBLs present severe risks to debt sustainability, often acting as 'senior debt' that takes priority over traditional lenders. This can lead to a situation where a country services its RBLs while defaulting on other obligations, as seen in Venezuela in 2018.
• There is a significant lack of transparency surrounding RBLs, with two-thirds of these loans going to countries with poor or failing Resource Governance Index scores. This opacity covers interest rates, maturity, and security arrangements.
• RBLs often undermine competitive public procurement, particularly those involving Chinese policy banks, which frequently mandate the use of Chinese construction companies and suppliers, eliminating the possibility of competitive bidding.
• Between 2004 and 2008, 30 RBLs were signed across 11 African countries, totaling US$65.8 billion. In contrast, Latin America had fewer loans (22) but a higher total value of US$97.8 billion.
• The document recommends that governments subject RBLs to normal public procurement systems, increase transparency by making contract terms public, utilize external experts for negotiations, and ensure all associated costs are integrated into national budgets.

APA

African Forum and Network on Debt and Development (n.d.). RESOURCE-BACKED LOANS AND PUBLIC SECTOR COLLATERALISATION OF NATURAL RESOURCES IN AFRICAN COUNTRIES. https://afrodad.org/sites/default/files/publications/Resource-Backed-Loans-and-Public-Sector-Collateralisation-of-Natural-Resources-in-African-Countries.pdf

Chicago

African Forum and Network on Debt and Development. RESOURCE-BACKED LOANS AND PUBLIC SECTOR COLLATERALISATION OF NATURAL RESOURCES IN AFRICAN COUNTRIES. n.d. https://afrodad.org/sites/default/files/publications/Resource-Backed-Loans-and-Public-Sector-Collateralisation-of-Natural-Resources-in-African-Countries.pdf.

Wikipedia

{{cite report |author=African Forum and Network on Debt and Development |title=RESOURCE-BACKED LOANS AND PUBLIC SECTOR COLLATERALISATION OF NATURAL RESOURCES IN AFRICAN COUNTRIES |url=https://afrodad.org/sites/default/files/publications/Resource-Backed-Loans-and-Public-Sector-Collateralisation-of-Natural-Resources-in-African-Countries.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{africanforumandnetworkondebtanddevelopmentndresourcebacked, author = {{African Forum and Network on Debt and Development}}, title = {{RESOURCE-BACKED LOANS AND PUBLIC SECTOR COLLATERALISATION OF NATURAL RESOURCES IN AFRICAN COUNTRIES}}, institution = {African Forum and Network on Debt and Development}, url = {https://afrodad.org/sites/default/files/publications/Resource-Backed-Loans-and-Public-Sector-Collateralisation-of-Natural-Resources-in-African-Countries.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }