• Average borrowing costs rose from 2.7% to 5.1% between 2020 and 2024

• “Blend” countries hit hardest by rising global interest rates

• Higher debt costs threaten spending on health and social programs

Borrowing costs for African countries surged by 91% between 2020 and 2024, driven by global interest rate pressures in the wake of the Covid-19 pandemic and the war in Ukraine, according to a report released April 14 by ONE Data, the data platform of the ONE Campaign.

The report, titled “Priced Out: The Rising Cost of Borrowing for Low- and Lower-Middle-Income Countries,” shows that average borrowing costs across the continent rose from 2.7% to 5.1% over the period.

The increase has affected nearly all major sources of external financing. Borrowing costs from the International Bank for Reconstruction and Development (IBRD), part of the World Bank Group and once among the cheapest options for middle-income countries, climbed from 1.4% to 5.2%.

Chinese financing, long seen as an alternative to Western-dominated financial systems, also became more expensive. Interest rates rose by 3.2 percentage points, from an average of 2.5% in 2020 to 5.7% in 2024 for African borrowers.

For the poorest countries, concessional financing from the International Development Association (IDA) has helped shield them from market volatility. Still, these countries face broader financial constraints, including limited funding volumes, declining aid, and gaps in emergency support.

Middle-income countries with access to capital markets—such as Angola and Egypt—as well as “blend countries” like Kenya, Senegal, Benin, and Ghana, have seen borrowing costs rise sharply. These countries sit in a difficult position: not poor enough to rely fully on concessional financing, yet not wealthy enough to absorb higher market rates easily.

According to the report, the world’s ten “blend countries” were the most affected. They could have saved up to $20.8 billion between 2020 and 2024 if $40.6 billion in sovereign bond issuance had been financed through cheaper multilateral lending windows.

Instead, they have had to rely on international bond markets, where borrowing costs are significantly higher, while access to concessional financing remains limited in both scale and flexibility.

The report also warns that geopolitical tensions, particularly in the Middle East, could further worsen the situation.

The IDA, the main source of concessional financing, depends on voluntary contributions from wealthy donor countries. Cuts in aid—especially from North American and European donors—are putting pressure on its funding capacity.

Although multilateral loans still offer savings, their reach remains limited. For every $100 borrowed from the IBRD, the most vulnerable countries saved about $22 compared with market rates, and up to $48 compared with implied market rates for countries unable to issue bonds.

The report, developed in collaboration with the Rockefeller Foundation, highlights the growing impact of high borrowing costs on development spending. As countries struggle to service more expensive debt, funds available for health, social protection, and other public programs are shrinking.

At the same time, rising energy and food prices are increasing pressure on households, while declining donor support further limits governments’ ability to respond.

The conflict involving Iran, the United States, and Israel adds another layer of risk. Highly indebted developing countries now face two potential scenarios: commodity-driven inflation pushing global interest rates higher, or a slowdown in global growth reducing export revenues and tax income. Both paths lead to the same outcome—reduced fiscal space when it is most needed.

The consequences are already visible. In 2025, the number of children dying before age five likely increased for the first time in decades. Between 638 million and 720 million people—around 7.8% to 8.8% of the global population—faced hunger in 2024.

These pressures could intensify as food and energy prices rise further, affecting remittances and household purchasing power across the developing world.

To address the issue, the report calls for expanding the lending capacity of multilateral development banks, aligning financing with countries’ actual needs, reforming international debt restructuring mechanisms, and maintaining concessional rates through the IDA.

Walid Kéfi