December 17, 2024
The African Development Bank, AfDB, has disclosed that African countries will need $74 billion in 2024 to service their debt obligations
Chief Economist and Vice President of Economic Governance and Knowledge Management at the bank, Prof. Kevin Urama, made this known on Monday at the launch of Debt Management Forum for Africa (DeMFA) and its inaugural policy dialogue held in Abuja
While emphasizing the gravity of Africa’s debt burden at the event that was themed “Making Debt Work for Africa: Policies, Practices, and Options.” Urama noted that the $74 billion debt service requirement for 2024 marked a significant rise from $17 billion in 2010.
He said of the amount, $40 billion is owed to private creditors, representing 54% of the total debt service.
As reported by Nairametrics, Urama however, cautioned that the actual figure could be higher when hidden debts and contingent liabilities are considered, he noted that “20 African countries are in debt distress or at high risk of debt distress,” with refinancing risks expected to rise for countries with significant bullet redemption.
READ MORE; Foreign trade Rose in Q3’24 in manufactured goods sector
Speaking on debt sustainability challenges, the AfDB Chief Economist, explained 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.”
Urama, who criticized the slow and unsustainable nature of debt relief that failed to address Africa’s debt sustainability challenges, highlighted the persistent liquidity challenges Africa faces, with annual debt refinancing needs projected to reach $10 billion between 2025 and 2033. He added that African Eurobond yields surged to 15% in 2023, more than double the 2019 rate, making refinancing efforts more challenging.
Addressing inequalities in global financial flows, Urama noted Africa’s paradox of high borrowing costs despite relatively low default risks.
READ MORE; FG Targets N120 Billion In December Bond Auction
He referenced 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.
“This deprives the region of critical resources for development,” he added.
Urama called for Africa-led solutions to address the continent’s debt challenges. He emphasized the need to rethink borrowing models and prioritize productive investments
