Africa’s debt expected to stay above pre-pandemic levels

Harare — Africa’s public debt would stay above pre-pandemic levels in 2024 and 2025, with many countries still at risk of falling into debt distress as they struggled to service international loans, a UN official said on Wednesday.

Addressing a UN Commission for Africa conference at Victoria Falls, the agency’s macroeconomics and governance director Adam Elhiraika said eight countries were in debt distress, while 13 were expected to be at risk of debt distress.

Africa has been hit by repeated economic shocks since 2020, from the Covid-19 pandemic to Russia's invasion of Ukraine and rising US interest rates, putting cash-strapped, debt-laden governments in a political and fiscal bind.

“Debt will stay above the pre-pandemic level. This is huge,” Elhiraika said, adding that the continent’s debt-to-GDP ratio was 62.5% at the end of 2022. This ratio doubled to 57% in the decade to 2020 and could rise 10 percentage points in the next five years if Africa’s fiscal trajectory did not change, according to an IMF report.

“There is need for African countries to work with international partners to address debt distress,” Elhiraika said.

Africa’s fiscal deficit deteriorated to 4.6% of GDP last year, Elhiraika said, without citing previous years’ figures, and was set to widen further to 5% in 2024. Many African governments were having to slash spending, while interest payments were growing faster.

Zimbabwe finance minister Mthuli Ncube called for a rethink of the global financial system.

“Access to finance for Africa must be made cheaper and easier. Hence, there is a need to relook at the international financial architecture to ensure that it is fit for purpose,” Ncube told the conference.

Zambia became the first African nation to default on its debt in late 2020 during the Covid-19 pandemic. Ghana followed in 2022, while Ethiopia became the latest last December.

Reuters