African countries will need $74 billion to service their debt obligations in 2024, marking a sharp increase from $17 billion in 2010, according to Prof. Kevin Urama, Chief Economist and Vice President of Economic Governance and Knowledge Management at the African Development Bank (AfDB).
Urama made the disclosure during the launch of the Debt Management Forum for Africa (DeMFA) and its inaugural policy dialogue held in Abuja on Monday, under the theme: “Making Debt Work for Africa: Policies, Practices, and Options.”
Highlighting the gravity of the situation, Urama revealed that $40 billion of the 2024 debt service obligation—about 54%—is owed to private creditors, raising concerns about refinancing challenges. He further cautioned that the total figure could surpass projections when hidden debts and contingent liabilities are factored in.
“According to the African Economic Outlook Report (AEO) 2024, African countries are expected to spend around $74 billion on debt service in 2024, up from $17 billion in 2010,” Urama said. “Of this amount, $40 billion is owed to private creditors, representing 54% of total debt service.”
Urama stressed the growing debt distress risk across the continent, stating that 20 African countries are already classified as being in debt distress or at high risk. He warned that refinancing risks will rise for nations with significant bullet redemptions due in the near future.
Urama underscored the stark disparity between developed and developing nations in handling debt burdens. While developed countries can sustain high debt levels at low service costs, African nations, particularly the most vulnerable, are diverting a significant share of their limited fiscal resources to repay public debt.
“Developing countries, including those in Africa, are devoting an increasingly large proportion of their fiscal resources to servicing public debt,” Urama said.
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He criticized the slow and unsustainable nature of debt relief and restructuring efforts, arguing that current measures fail to resolve Africa’s structural debt challenges.
Urama highlighted Africa’s annual debt refinancing needs, projected to hit $10 billion between 2025 and 2033, and pointed out the alarming surge in African Eurobond yields. The yields jumped to 15% in 2023, more than double the 2019 rate, making refinancing increasingly costly.
“These high yields are driven by a combination of domestic and external factors, as well as unfair risk perceptions, which continue to disadvantage Africa,” Urama explained.
Urama referenced a United Nations Development Programme (UNDP) estimate, which shows that Africa pays an “Africa Risk Premium” of $24 billion annually in excess interest due to distorted sovereign risk perceptions.
“This deprives the region of critical resources for development,” Urama said, calling for reforms in global financial systems to address these unfair borrowing costs.
Urama advocated for Africa-led solutions to tackle the debt crisis, urging governments to rethink borrowing models and focus on productive investments that stimulate growth and resilience.
“We must prioritize investments that create sustainable economic value rather than deepening debt burdens,” he stressed.
In her remarks, Ms. Allison Holland, Assistant Director at the International Monetary Fund (IMF), emphasized the need to address private-sector debt before seeking support from official creditors.
“The big challenge here is, why don’t we move forward with the private sector first? Wouldn’t this be faster?” she questioned.
Holland noted that IMF interventions are often restricted until official creditors commit to engaging in debt resolutions, underscoring the complexities of multilateral debt relief processes.
Dr. Anthony Simpasa, Director of the Macroeconomic Policy, Forecasting, and Research Department at AfDB, linked Africa’s rising debt to the growing frequency of climate shocks. He explained that many vulnerable nations have been forced to borrow heavily to finance climate-related projects, such as adaptation and mitigation measures.
“Climate shocks have forced countries to take on significant debt, and these projects constitute the largest share of climate financing instruments on the continent,” Simpasa said.