African Development Bank Vice President and Chief Economist Prof. Kevin Urama, speaking on Nov. 30 at the 5th African Union Extraordinary Session of the Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning, and Integration, that took place in Abuja, Nigeria, said: “The changing structure of debt toward private creditors comes with opportunities and challenges. For example, African countries are paying 500% more in interest costs when borrowing in international capital markets than when borrowing from multilateral development banks such as the African Development Bank, the World Bank,” according to Nigeria’s Punch newspaper on Dec. 2.
He noted that a growing shift towards private creditors has exacerbated Africa’s debt burden. At the end of 2023, about 49% of Africa’s debt was privately owned; that is expected to rise to 54% by the end of 2024. This private debt carries interest rates five times higher than borrowing from multilateral institutions, such as the AfDB or the World Bank. He also pointed out that since 2010, Africa’s public debt has increased by 170%, largely due to structural issues within the global debt system, recent global shocks, and weaknesses within Africa’s own macroeconomic frameworks.
He added that, between 2015 and 2022, the average debt-servicing costs for 49 of Africa’s 54 countries surged from 8.4% of GDP to 12.7% of GDP. These interest rate increases mean that African nations are projected to spend around $74 billion on debt service in 2024, up from just $17 billion in 2010, according to the 2024 African Economic Outlook Report, Chapter 1. Of this amount, $40 billion is owed to private creditors, accounting for 54% of the total debt service. It has been reported that African countries are forced to pay higher interest rates only because they are African. (For a further analysis of Africa’s debt crisis, see “U.S. Policy Crushing Developing Nations with a Burden of Unpayable Debt,” EIR, August 23, 2024.)
