0
0 News Ghana, Latest Updates and Breaking News of Ghana, News Ghana, https://newsghana.com.gh/africa-faces-us74-billion-debt-service-burden-in-2024-afdb-warns/
African nations will require $74 billion in 2024 to meet their debt obligations, a sharp rise from $17 billion in 2010, according to Prof. Kevin Urama, Chief Economist and Vice President for Economic Governance and Knowledge Management at the African Development Bank (AfDB).
Prof. Urama made the disclosure during the launch of the Debt Management Forum for Africa (DeMFA) in Abuja on Monday, December 16, 2024.
The forum, themed “Making Debt Work for Africa: Policies, Practices, and Options,” brought together key policymakers and stakeholders to discuss the continent’s growing debt crisis. Urama highlighted that more than half of Africa’s debt service costs—approximately $40 billion—are owed to private creditors, reflecting an increasing reliance on private capital markets.
He expressed concern over the sustainability of Africa’s debt burden, noting that 20 African countries are either in debt distress or at high risk of it, with rising refinancing risks due to large bullet repayments. Urama further warned that the reported $74 billion debt service figure could be an underestimate, pointing to hidden debts and contingent liabilities that add to the financial strain.
“Developed nations can manage high levels of debt with low servicing burdens, while African countries are dedicating an ever-increasing proportion of their fiscal resources to debt repayment,” Urama said. He criticized global debt relief mechanisms as slow and ineffective, failing to address the underlying structural issues that compromise Africa’s debt sustainability. The AfDB projects that annual debt refinancing needs for African countries will rise to $10 billion between 2025 and 2033.
The cost of borrowing for African nations has also increased significantly. In 2023, African Eurobond yields surged to 15%, more than double the 7% average seen in 2019. Urama identified the “Africa Risk Premium,” an estimated $24 billion annual excess cost due to inflated risk perceptions, as a key factor contributing to the continent’s debt challenges.
The forum also spotlighted climate change as a major driver of rising debt. Dr. Anthony Simpasa, Director of AfDB’s Macroeconomic Policy, Forecasting, and Research Department, noted that many African nations, particularly those vulnerable to climate shocks, have had to borrow heavily to finance climate-related projects, especially for adaptation and mitigation.
Ms. Allison Holland, Assistant Director of the Strategy, Policy, and Review Department at the International Monetary Fund (IMF), emphasized the importance of prioritizing private-sector debt resolution. She questioned the effectiveness of involving public-sector creditors before private-sector creditors, noting that IMF interventions are often contingent on the willingness of official creditors to participate.
The event underscored the urgency of adopting comprehensive solutions to Africa’s debt crisis. These include rethinking borrowing models, improving global financial systems, and investing in the continent’s economic resilience. Prof. Urama concluded by stressing the need for structural reforms and enhanced international cooperation to address the root causes of Africa’s mounting debt burden.
News Ghana, Latest Updates and Breaking News of Ghana, News Ghana, https://newsghana.com.gh/africa-faces-us74-billion-debt-service-burden-in-2024-afdb-warns/
