The African Development Bank (AfDB) has disclosed that African nations will need $74 billion to service their debt obligations in 2024, a figure that highlights the mounting fiscal pressures across the continent.
This revelation was made by Prof. Kevin Urama, AfDB’s Chief Economist and Vice President for Economic Governance and Knowledge Management, during the launch of the Debt Management Forum for Africa (DeMFA) held in Abuja. The inaugural policy dialogue, themed “Making Debt Work for Africa: Policies, Practices, and Options,” brought stakeholders together to address Africa’s escalating debt challenges.
Rising Debt Burden
According to Prof. Urama, the debt service requirement has ballooned significantly over the years, rising from $17 billion in 2010 to the projected $74 billion in 2024. Notably, $40 billion of this amount is owed to private creditors, accounting for 54% of the total.
Urama further warned that the actual figure could exceed current estimates when factoring in hidden debts and contingent liabilities. He revealed that 20 African countries are either in debt distress or at high risk of it, with refinancing risks increasing for nations facing substantial repayment deadlines.
Debt Sustainability Challenges
Prof. Urama underscored the disparity between developed and developing countries when it comes to managing debt burdens. While advanced economies can sustain high debt levels with minimal service costs, African nations are allocating a significant portion of their fiscal resources to debt servicing.
He criticized the slow pace and inefficiency of global debt relief and restructuring programs, which fail to address Africa’s underlying debt sustainability issues.
“Developing countries, particularly in Africa, are devoting an increasingly large proportion of their fiscal resources to servicing public debt,” he said.
Liquidity and Refinancing Woes
The AfDB economist highlighted Africa’s persistent liquidity challenges, noting that annual debt refinancing needs are projected to reach $10 billion between 2025 and 2033. Additionally, African Eurobond yields surged to 15% in 2023—more than double their 2019 levels—making it increasingly difficult for countries to refinance their debts.
“These high yields are driven by domestic and external factors, as well as unfair risk perceptions,” Urama explained.
Global Financial Inequalities
Prof. Urama also pointed to inequalities in global financial systems, noting that Africa continues to suffer from disproportionately high borrowing costs despite its relatively low default rates. He cited a United Nations Development Programme (UNDP) estimate showing that African countries pay an “Africa Risk Premium” of $24 billion annually in excess interest.
“This deprives the region of critical resources for development,” he added, calling for homegrown solutions to Africa’s debt issues and a rethinking of borrowing models to prioritize productive investments.
Calls for Private Sector Involvement
During the dialogue, Ms. Allison Holland, Assistant Director of the Strategy, Policy, and Review Department at the International Monetary Fund (IMF), stressed the importance of addressing private-sector debt resolutions before engaging public creditors.
“The big challenge here is, why don’t we move forward with the private sector first? Wouldn’t this be faster?” Holland queried, noting that IMF interventions often depend on the readiness of official creditors to cooperate.
“If private sector debts remain unresolved, the IMF’s capacity to intervene becomes restricted,” she added.
Climate Shocks and Rising Debt
Dr. Anthony Simpasa, Director of the Macroeconomic Policy, Forecasting, and Research Department at AfDB, attributed Africa’s rising debt levels to climate-related challenges. He explained that frequent climate shocks have forced many vulnerable nations to borrow heavily to fund adaptation and mitigation projects.
“These projects now constitute the largest share of instruments used for climate financing on the continent,” Simpasa noted.
The Way Forward
The discussions emphasized the urgent need for policy reforms, equitable access to financing, and innovative debt management strategies. Prof. Urama reiterated that Africa must lead the way in developing sustainable solutions to its debt challenges while tackling structural issues such as liquidity constraints and unfair borrowing costs.
The forum’s insights highlight the importance of collaboration among governments, financial institutions, and private stakeholders to ensure Africa’s debt burden does not stifle its development ambitions.
