African countries are enduring a 500% rise in debt servicing costs when borrowing from international markets, according to the African Development Bank (AfDB). Speaking at a recent African Union summit in Abuja, Nigeria, AfDB Chief Economist Prof. Kevin Urama highlighted the continent’s growing reliance on private creditors, which accounted for 49% of Africa’s debt in 2023, with projections suggesting this figure will rise to 54% in 2024. This shift has significantly increased interest costs compared to loans from multilateral institutions, placing African nations in a precarious financial position.
Africa’s public debt has surged by 170% since 2010, driven by structural global debt issues, economic shocks, and weak macroeconomic frameworks. Between 2015 and 2022, average debt servicing costs rose from 8.4% to 12.7% of GDP across 49 African nations, with 54% of the projected $74 billion debt servicing cost for 2024 owed to private creditors. Prof. Urama stressed the unsustainable nature of using high-cost, short-term debt to fund long-term projects, warning of worsening debt distress in at least 20 African countries.
In response, the AfDB is proposing an African Financial Stability Mechanism to provide affordable refinancing solutions and reduce dependence on expensive private creditors. The initiative complements ongoing efforts, such as the African Monetary Institute and regional financial reforms, aimed at achieving economic integration and resilience. Nigerian officials also emphasized national strides, including banking reforms and subsidy removals, while calling for unified action to secure Africa’s economic self-reliance.
