African Countries to Spend $74 Billion on Debt Service in 2024 – AfDB Chief Economist Says
African nations are projected to spend $74 billion on debt servicing in 2024, marking a significant rise from $17 billion in 2010. This was revealed by Prof. Kevin Urama, Chief Economist and Vice President of Economic Governance and Knowledge Management at the African Development Bank (AfDB), during the launch of the Debt Management Forum for Africa (DeMFA) in Abuja on Monday.
Themed “Making Debt Work for Africa: Policies, Practices, and Options,” the forum highlighted the mounting debt challenges faced by African countries. Urama explained that $40 billion, representing 54% of the total debt service obligation, is owed to private creditors. He cautioned that the figure could be higher when hidden debts and contingent liabilities are factored in.
“Twenty African countries are in debt distress or at high risk of debt distress, with refinancing risks expected to rise for nations with significant bullet redemptions,” Urama stated.
Debt Sustainability and Liquidity Pressures
Urama underscored the disparity in debt management between developed and developing nations, emphasizing that Africa’s debt burden diverts substantial fiscal resources from development priorities.
“While developed countries can sustain high levels of debt with low service burdens, Africa’s most vulnerable nations are dedicating increasingly large proportions of fiscal resources to debt service,” he added.
The AfDB economist also pointed to liquidity challenges, with annual debt refinancing needs projected to hit $10 billion between 2025 and 2033. He noted that African Eurobond yields surged to 15% in 2023, more than double the 2019 rate, largely due to external pressures and perceived risk.
Urama criticized the global financial system for subjecting Africa to unfair borrowing conditions, referencing the United Nations Development Programme (UNDP) estimate that Africa pays an “Africa Risk Premium” of $24 billion annually in excess interest due to misjudged sovereign risk.
Calls for Africa-Led Solutions
To address Africa’s debt sustainability, Urama advocated for Africa-led solutions and rethinking borrowing models to prioritize productive investments.
Meanwhile, Ms. Allison Holland, Assistant Director of the Strategy, Policy, and Review Department at the International Monetary Fund (IMF), called for prioritizing private-sector debt resolution over public-sector involvement.
“The big challenge here is, why don’t we move forward with the private sector first? Wouldn’t this be faster?” she queried.
Holland stressed that IMF interventions often depend on the willingness of official creditors to engage in the debt resolution process.
Rising Debt and Climate Shocks
Adding to the discussion, Dr. Anthony Simpasa, Director of the Macroeconomic Policy, Forecasting, and Research Department at AfDB, attributed Africa’s rising debt levels to frequent climate shocks.
“Countries, particularly those vulnerable to climate shocks, have been forced to borrow heavily to finance climate-related projects. These projects, aimed at adaptation and mitigation, constitute the largest share of climate financing instruments in Africa,” Simpasa explained.
The dialogue emphasized the urgent need for structural reforms, enhanced debt relief mechanisms, and innovative financing strategies to make Africa’s debt work for its growth and development.
