‘Africa Needs $74bn Debt Service’

Prof. Kevin Urama, Chief Economist and Vice President, Economic Governance and Knowledge Management, African Development Bank (AfDB), said the continent needs 74 billion dollars in 2024 for debt service.
Urama disclosed this at the launch of the Debt Management Forum for Africa (DeMFA) and its innaugural policy dialogue on Monday in Abuja.
The theme of the dialogue is “Making Debt Work for Africa: Policies, Practices, and Options.”
He cautioned that the actual figure could be higher if hidden debt and contingent liabilities were accounted for.
Umara said, “According to the African Economic Outlook Report (AEO) 2024, in 2024, African countries are expected to spend around 74 billion dollars on debt service, up from 17 billion dollars in 2010, of which 40 billion dollars is owed to private creditors, representing 54 per cent of total debt service.
“As at today, 20 African countries are in debt distress or at high risk of debt distress. And refinancing risks could further increase going forward, especially for countries with large bullet redemptions.
“The implication is that while developed countries can sustain high levels of debt with low debt service burdens, developing countries including in Africa, particularly the most vulnerable among them, are devoting an increasingly large proportion of their fiscal resources to servicing public debt.
“Experiences have shown that debt relief and debt restructuring measures are often slow and their results are unsustainable as they do not address the structural issues that lead to the debt sustainability challenge.”
On rising debt refinancing needs and sovereign bond yields, Urama said that there were persistent liquidity challenges facing Africa, with debt refinancing needs of 10 billion dollars annually between 2025 and 2033.
He noted that African Eurobond yields had surged to 15 per cent in 2023, more than double the 2019 rate, complicating refinancing efforts.
He attributed these high yields to a mix of domestic and external factors, as well as unfair risk perceptions.
He emphasised the urgency of the discussions, while highlighting the persistent challenges posed by global, regional and domestic shocks.
“The timeliness and purpose of our meeting today cannot be overstated. We live in an era of recurrent and overlapping global crises, economic shocks, geopolitical tensions, climate change effects, all of which have intensified the realisation of the need for comprehensive reforms.
“This is particularly within the global finance and debt architectures underpinning development financing,” he added.
Umara also shed light on the growing debt challenges in Africa, saying, “Africa’s public debt has surged by 170 per cent since 2010 due to structural issues, global shocks, and domestic macroeconomic weaknesses.
“While public debt-to-GDP ratios have stabilised, the cost of debt servicing has risen sharply, diverting resources from critical investments in infrastructure and economic transformation. This has left 20 African countries in debt distress or at high risk of it.”
On inequalities in global financial flows, he noted that Africa faces a paradox of debt and development financing.
He added that the continent bears high borrowing costs in spite of its relatively low default risk.
“According to a United Nation Development Programme (UNDP) estimate, Africa pays an ‘Africa Risk Premium’ of 24 billion dollars annually in excess interest due to unfair sovereign risk perceptions, depriving the region of critical resources for development.”