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African debt levels continued to record significant jumps during 2024, driven by declining domestic production, inflation, declining development and investment rates, and rising interest rates. The World Bank Group estimates that Africa’s total external debt rose to $1.152 trillion in 2023, compared to $1.12 trillion in 2022, with some estimates indicating that debt could reach about $2 trillion.
Africa’s debt challenges continue in 2024, with global interest rates at their highest levels in 40 years and many of the countries’ debt securities coming due.
According to the World Bank Group, Africa will pay $163 billion in debt service alone through 2024, a sharp increase from $61 billion in 2010.
undermining development
According to a new research paper by the Abu Dhabi-based Interregional Centre for Strategic Analysis, the increasing burden of African debt servicing will undermine the continent’s sustainable development goals, particularly in the areas of health, education and infrastructure.
The Center said: A new report issued by the United Nations Program showed that the increasing public debt is strangling the countries of sub-Saharan Africa, noting that debt service represents 50% of the government revenues of Angola, Kenya, Malawi, Rwanda, Uganda and Zambia.
According to UNCTAD, the debt growth rate in developing countries is double the global average. For example, African debt has grown to more than 60% by 2024.
Restructuring
The African Development Bank says Africa needs urgent debt restructuring, more favorable lending terms and about $25 billion for the African Development Fund.
5 times
The center added that between 2000 and 2020, Africa’s external debt increased more than 5-fold, representing nearly 65% of its GDP in 2022.
After about 3 years of “Covid-19”, the debt crisis in sub-Saharan African countries is still worsening and escalating, despite local and international efforts to confront the repercussions of global shocks, in light of the rising costs of debt interest, the increase in the cost of food and energy, and the decline in the currency.
The center continued: With the rise in public debt resulting from declining tax revenues and rising interest rates, development in sub-Saharan African countries faces a major obstacle; as the troubled financial conditions limit the ability of governments to invest.
Indicators
The center pointed out that there are key indicators that clarify the current state of African debt, most notably: the continued rise in the average debt-to-GDP ratio.
According to the African Union, the average debt-to-GDP ratio in Africa is expected to remain high at 65% through 2024, due to growing financing needs and rising debt servicing costs.
According to the International Monetary Fund, the ratio of debt interest payments to government revenues in sub-Saharan Africa, which stands at about 10.5%, has doubled over the past decade, becoming about three times that of developed countries.
Credit rating agency Fitch expects the ratio to reach 40% in Nigeria and 28% in Kenya, for example, in 2024.
liquidity drought
According to the International Monetary Fund, liquidity has dried up for most African economies, as a result of global shocks over the past three years and government spending driven by more debt, which has resulted in the accumulation of a heavy debt legacy in many African countries.
According to the World Bank, nine African countries are currently in debt distress, while about 15 others are at “high risk” of not being able to meet repayment requirements.
Some 19 African countries are expected to spend more than a fifth of their revenues in 2024 on external debt service.
Some African countries are likely to go into debt restructuring in 2024, as debt restructuring has become necessary to restore debt burdens to sustainable levels.
