Africa Requires $74 Billion In Debt Service By 2024 – AfDB

Prof. Kevin Urama, Chief Economist and Vice President of Economic Governance and Knowledge Management at the African Development Bank (AfDB).

Prof. Kevin Urama, Chief Economist and Vice President of Economic Governance and Knowledge Management at the African Development Bank (AfDB), has disclosed that African countries will need $74 billion in 2024 to meet their debt obligations.

Urama said this during the Debt Management Forum for Africa (DeMFA) launch and first policy discussion, which took place in Abuja on Monday.

 

“Making Debt Work for Africa: Policies, Practices, and Options” was the event’s theme.

 

Underscoring the severity of Africa’s debt load, Urama clarified that the 2024 debt service obligation of $74 billion represents a substantial increase from $17 billion in 2010. Of this sum, $40 billion, or 54% of the total debt service, is payable to private creditors.

 

“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 percent of total debt service,” he noted.

 

Urama also issued a warning that when contingent obligations and hidden debts are taken into account, the true number may be larger.

According to him, refinancing risks are anticipated to increase for nations with substantial bullet redemptions.

“20 African countries are in debt distress or at high risk of debt distress,” he added.

Challenges of debt sustainability

The difference in how wealthy and developing countries handle their debt loads was emphasized by the AfDB Chief Economist.

“Developing nations, especially those in Africa, which are the most vulnerable among them, are allocating an increasing amount of their fiscal resources to servicing public debt, whereas developed nations can maintain high debt levels with low debt service burdens,” he stated.

The delayed and unsustainable nature of debt relief and restructuring initiatives, which ignore the structural problems underlying Africa’s debt sustainability problems, was criticised by Urama.

“This deprives the region of critical resources for development,” he continued.

Urama urged Africa to take the lead in finding answers to the continent’s debt problems. He underlined the necessity of reconsidering borrowing schemes and giving priority to profitable ventures.

Resolving debt

Prioritising private-sector debt resolution over public-sector creditors was emphasised by Ms. Allison Holland, Assistant Director of the Strategy, Policy, and Review Department of the International Monetary Fund (IMF).

“The big challenge here is, why don’t we move forward with the private sector first? Wouldn’t this be faster?” She went on.

Holland went on to say that the willingness of official creditors to participate is frequently a prerequisite for IMF initiatives.

“If the private sector is unable to repay debts, the IMF is unable to move forward. Official creditors remain an important part of the process,” she stated.

Africa’s growing debt is a result of more frequent climate shocks, according to Dr. Anthony Simpasa, Director of the AfDB’s Macroeconomic Policy, Forecasting, and Research Department.

“Many countries, particularly those vulnerable to climate shocks, have been forced to borrow heavily to finance climate-related projects. These initiatives, which focus on adaptation and mitigation, account for the majority of climate finance instruments on the continent,” he stated.

 

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