Afreximbank’s report suggests that Africa’s debt outlook should improve by 2028, driven by lower interest rates, progress in debt restructuring efforts across several countries, and a more favorable economic environment.

Africa’s debt burden has surged over the years, with interest payments taking up a growing share of government revenues. In 2008, interest costs represented 6.8% of public revenues on average, but by 2024, that figure had jumped to 27.5%, according to a report published on February 21 by the African Export-Import Bank (Afreximbank).

Titled African Debt Outlook: A Ray of Optimism, the report highlights a troubling rise in interest payments as a percentage of GDP, reaching 5% in 2024, up from 1.4% in 2008 and 3.4% in 2019.

This growing burden is mainly driven by rising borrowing needs across the continent and higher interest rates on African debt. Public debt levels remain high, largely due to underdeveloped domestic financial markets and a growing demand for foreign currency to finance imports, which has worsened external debt levels.

The average debt-to-GDP ratio in Africa has surged by 39.3 percentage points since 2008, reaching 71.7% in 2023. External debt has also risen significantly, climbing to about $1.16 trillion in 2023—60% of the continent’s total public debt. Projections indicate further increases to $1.17 trillion in 2024 and $1.29 trillion by 2028, reflecting the continent’s expanding financing needs amid rapid population growth.

However, this debt is not evenly distributed. In H1 2024, ten countries accounted for 69% of Africa’s external debt: South Africa (14%), Egypt (13%), Nigeria (8%), Morocco (6%), Mozambique (6%), Angola (5%), Kenya (4%), Ghana (4%), Côte d’Ivoire (3%), and Senegal (3%).

Surging Interest Rates

The report also highlights a sharp rise in borrowing costs. The effective interest rates on African debt soared to 8.2% in 2024, a steep jump from the stable range of 5.4% to 6.3% observed between 2008 and 2019. This surge is attributed to inflation, heightened risk perception among lenders, and tighter monetary policies.

While Africa’s debt levels remain comparable to other regions, the risk of a severe debt crisis is a growing concern. Nine countries are already in debt distress—Ghana, Malawi, Mozambique, the Republic of Congo, São Tomé and Príncipe, Somalia, Sudan, Zambia, and Zimbabwe—while 19 others, including Burundi, Cameroon, the Central African Republic, Tunisia, Ethiopia, and Kenya, are at high risk of following suit.

Despite these challenges, Afreximbank remains cautiously optimistic. The bank expects Africa’s debt outlook to improve by 2028, supported by falling interest rates, stronger credit ratings, renewed access to capital markets, and progress in debt restructuring for countries like Zambia, Ghana, and Ethiopia.