The African Development Bank (AfDB) has revealed that 13 African countries are currently at high risk of debt distress, while six are already in debt distress.
The AfDB disclosed at the inauguration of African Debt Managers Initiative Network (ADMIN), to provide home-grown solutions to Africa’s debt challenges in Addis Ababa, Ethiopia.
Although the AfDB did not name the African countries currently facing debt distress, there have been concerns over Nigeria’s debt profile. With the recent approval of an additional $2.25 billion loan for the country by the World Bank, Nigeria’s public debt profile grew to $110.48 billion, approximately N162.81 trillion.
By the end of May 2024, the country’s debt services and payments had reached $2.19 billion, a sharp rise from $1.12 billion recorded in the same period in 2023.
The cumulative foreign debt servicing costs for the first five months of 2024 amounted to $2.19 billion, nearly doubling the amount spent in the same period in 2023.
Speaking on the factors driving Africa’s debt, AfDB Institute Director, Eric Ogunleye, said that the growing financing needs for infrastructure development, poverty reduction, mitigating climate change, and tackling insecurity are driving African countries to increase their borrowing, further increasing debt vulnerability.
He said rising debt vulnerability and weak debt management capacity in many African countries have continued to worsen macroeconomic outcomes and hamper effective policy responses to shocks exacerbating debt distress in some countries.
“There is, therefore, a growing need to strengthen debt management capacity in African countries,” Ogunleye told participants.
“A larger share of African debt is now owed to external bondholders and creditors outside the Paris Club who deal directly with debtor countries; this high-cost debt imposes a significant burden of debt servicing on African countries averaging 18 percent of total government revenue,” he explained.
Also speaking, former Director of Debt Management at South Africa’s National Treasury, Johan Krynauw, encouraged African countries to work more closely together to promote knowledge-sharing and support each other on debt management issues.
“In recent years, there have been many institutional initiatives from outside the continent to help African countries. The question is always why it did not work, and why we still have public finance and debt management problems today,” Krynauw said.
He noted that Africa has reached a stage where it has enough skills, knowledge, and experience to determine what works for its countries. According to him, that was one of the reasons the initiative was created for public debt managers in Africa to work together.
Speaking on the new initiative under the theme: Developing and Deepening Domestic Debt Markets in Africa. AfDB Director, Coulibaly Abdoulaye, said the network would provide tailored and home-grown solutions to the continent’s debt challenges.
He said the network would also strengthen the debt management capacity of African countries’ officials and institutions to resolve the debt rapidly challenges these countries face, restore macroeconomic stability, support inclusive growth, and promote the exchange of experiences among debt managers in regional member countries.
