Africa’s rising debt: Implications for development financing and a sustainable debt management approach

Image: Getty, hqrloveq
Image: Getty, hqrloveq

Presently, 19 African countries have exceeded the 60% debt-to-gross domestic product (GDP) threshold prescribed by the African Monetary Co-operation Programme (AMCP) for developing economies, while 24 have surpassed the 55% debt-to-GDP ratio suggested by the International Monetary Fund (IMF).

More worryingly, using the IMF debt service-to-revenue threshold and benchmark, only two out of the 16 countries facing a high risk of debt distress have the capacity to pay it off. The debt increase raises concerns among bilateral creditors and international financial institutions, as several countries continue to take on more debt to manage debt burdens and poor macroeconomic conditions. This is taking place on the back of two prominent debt relief initiatives, the Heavily Indebted Poor Country (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI), which offered $99 billion in debt relief, addressing about 40% of Africa’s total public debt.

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