- The African Development Bank says African countries need $74 billion to service debts in 2024
- AfDB noted that debt reliefs don’t address Africa’s debt sustainability challenges
- The bank also highlighted the inequalities in global financial flows
The African Development Bank (AfDB) says African countries need $74 billion to service debts in 2024.
Chief Economist and Vice-President of Economic Governance and Knowledge Management of AfDB, Professor Kevin Urama, stated this at the launch of Debt Management Forum for Africa (DeMFA) and its inaugural policy dialogue, held in Abuja on Monday, December 16.
Speaking at the event with the theme, ‘Making Debt Work for Africa: Policies, Practices, and Options,’ Professor Urama noted that African countries’ debt service requirement rose from $17 billion in 2010 to $74 billion in 2024.
He stated that 54 per cent of the $74 billion total debt service, representing $40 billion, is owed to private creditors, adding that the figure could be higher when hidden debts and contingent liabilities are considered.
Prof Urama 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.
“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.”
Debt relief doesn’t address Africa’s debt sustainability challenges
Urama further noted that debt relief and restructuring measures given to African countries have failed to address the continent’s debt sustainability challenges as they are slow and unsustainable.
He also noted that Africa faces a liquidity challenge, which is projected to further push its annual debt refinancing needs to $10 billion between 2025 and 2033.
Urama added that African Eurobond yields more than doubled to 15 per cent in 2023, which has compounded refinancing efforts.
“These high yields are driven by a combination of domestic and external factors, as well as unfair risk perceptions,” Urama said.
Inequalities of global financial flows
Prof Urama also highlighted the inequalities in global financial flows, noting that African countries are imposed with high borrowing costs despite relatively low default risks.
He referred to a United Nations Development Programme (UNDP) estimate that Africa pays an “Africa Risk Premium” of $24 billion annually in excess interest due to unfair sovereign risk perceptions.
The AfDB Vice President added that these inequalities deprive the African region of critical resources for development and called for Africa-led solutions to address the continent’s debt challenges.
African governments should prioritise borrowing longer-term loans with lower interest rates – AfDB
Meanwhile, TheRadar reported that the African Development Bank (AfDB) advised African governments to focus on borrowing longer-term loans with lower interest rates as a solution to the continent's debt challenge.
AfDB’s Vice-President for Economic Governance and Knowledge Management, Professor Kevin Urama, in an interview with the News Agency of Nigeria (NAN), said such loans should be underpinned by clear investment plans that can generate returns capable of repaying the debt.
