Soaring Debt Servicing Costs Undermine AfCFTA Ambitions – UNECA Warns
Rising debt servicing obligations are increasingly crowding out fiscal space for essential public investments across Africa, potentially undermining the effective implementation of the African Continental Free Trade Area (AfCFTA), the United Nations Economic Commission for Africa (UNECA) has cautioned.
In its Economic Report on Africa 2024 titled “Advancing the Implementation of the African Continental Free Trade Area: Proposing Transformative Strategic Actions”, UNECA revealed that the continent’s external debt service rose sharply from 1.6% of GDP in 2011 to 4.1% in 2022. Interest payments as a share of government revenues are expected to average 27% in 2024, a significant jump from 19% in 2019.
“In several large economies including Angola, Egypt, Ghana, Nigeria, and Uganda, interest payments have exceeded total government spending on education and health in recent years,” the report noted, highlighting the stark fiscal trade-offs that African governments now face in reconciling development needs with debt obligations.
According to UNECA, Africa’s total debt service bill for 2024 is projected at US$163 billion, representing a 12% increase over the previous year. While debt servicing is expected to peak in 2024 and gradually decline thereafter, it will remain well above pre-pandemic levels in the medium term, driven by high global interest rates, public finance volatilities, and the lingering impact of external shocks.
Africa’s average debt-to-GDP ratio is projected to decline from 67.3% in 2023 to 65.2% in 2024, with a further marginal drop to 62.1% in 2025. However, UNECA notes that current debt levels remain comparable to those seen before the debt relief efforts of the mid-2000s and continue to pose sustainability concerns.
Regional disparities in debt levels remain significant. In 2024, North Africa is projected to post the highest debt-to-GDP ratio at 76.0%, followed by Southern Africa (70.7%), West Africa (56.4%), Central Africa (51.2%), and East Africa (39.2%).
The report underscores that the continent’s fiscal fragility poses a major risk to the implementation of AfCFTA, which requires bold investments in trade infrastructure, productive capacity, digital innovation, and regional value chains.
To safeguard the AfCFTA’s transformative potential, UNECA recommends the following strategic interventions:
Enhance debt sustainability frameworks and explore debt restructuring options for countries facing acute liquidity constraints;
Mobilise concessional and climate-linked financing, especially to support the AfCFTA-aligned green transition, which could require up to US$22.4 billion in investments between 2025 and 2040;
Prioritise investment in digital trade systems, including broadband expansion, data centres, and the adoption of technologies such as blockchain to improve efficiency and reduce trade costs;
Empower women and SMEs through gender-sensitive trade policies and access to finance, education, and digital skills;
Harmonise regulatory frameworks across regional economic communities (RECs) to improve policy coherence and reduce market fragmentation;
Strengthen institutional capacity at the national level to ensure effective implementation of AfCFTA protocols.
“The scale of Africa’s debt burden is a significant constraint on development spending and long-term competitiveness,” UNECA stated. “Without sustainable debt strategies and coordinated investments, the promise of AfCFTA may not be fully realised.”
As debt servicing continues to absorb a disproportionate share of government resources, African policymakers face a crucial balancing act between fiscal consolidation and driving regional integration under the AfCFTA framework.
