The Cost of Inaction: Explaining Africa’s Debt Distress in 10 Charts — and Five Fixes for the G20

By Marina Zucker-Marques

The African continent holds immense potential for sustainable development. It is rich in renewable energy resources—home to 60 percent of the world’s solar potential, 30 percent of proven transition mineral reserves and enough wind capacity to meet its electricity needs 250 times over. Its young and growing population is another powerful engine for growth, with the population expected to nearly double by 2050, reaching 2.5 billion.

Unlocking this potential will require a significant scale-up in investment—both domestic and external—by 2030. However, rising debt burdens are making it increasingly difficult for many African countries to meet urgent spending needs while also investing in the future. This growing debt distress stems largely from external macroeconomic, geopolitical and climate shocks—rather than domestic mismanagement. Tightening global financial conditions, sluggish global growth, capital outflows, currency depreciation, inflation and escalating trade uncertainty have all undermined the continent’s economic outlook and exacerbated debt vulnerabilities.

Given the external origins of Africa’s debt crisis, international cooperation is essential. Since the COVID-19 pandemic, the Group of 20 (G20) has served as the main forum for global debt discussions, launching the Common Framework to support low-income countries. Yet the initiative has proven inadequate for addressing today’s challenges. Despite the fact that no low-income African country has been rated at “low” risk of debt distress since COVID-19, only four countries—Chad, Ethiopia, Ghana and Zambia—have applied to the Common Framework.

This month, the issue of debt is at the forefront of discussions, highlighted by the recent launch of the Vatican Jubilee report, the Paris Forum organized by the Paris Club and the Fourth United Nations Financing for Development Conference (FFD4). Moreover, with the G20 summit being hosted in Africa for the first time in 2025—and the African Union now a full member of the G20—there is a unique opportunity to address the continent’s mounting debt crisis. Doing so requires a clear understanding of how and why debt is constraining development and what changes are needed to improve the G20’s Common Framework. That’s exactly what our new paper with the South African-based Institute for Economic Justice seeks to explore.

This blog summarizes our findings. With 10 figures I explain the debt distress in the continent and with five points, I suggest concrete reforms for the G20 Common Framework.

Africa’s debt stock, though not exceptionally high, has become increasingly costly— driving up debt service burdens.

Although some countries—such as Senegal, Mauritius, Zambia and Cabo Verde—have high external public and publicly guaranteed (PPG) debt-to-gross national income (GNI) ratios, the continental average was 26 percent in 2023, below the historical trend, as shown in Figure 1. In the early 2000s, before the completion of the Heavily Indebted Poor Countries (HIPC) Initiative, average debt-to-GNI ratios exceeded 45 percent.

Figure 1: Africa’s Public and Publicly Guaranteed (PPG) External Debt Stock (including IMF credits), USD billion and as a share of GNI, 2000- 2023

However, looking to external PPG debt stock alone can be deceiving. This is because, in the last 15 years, Africa’s debt profile has changed significantly towards more commercial lenders and less concessional borrowing. As shown in Table 1, between 2008-2023, while the share of debt from multilateral development banks (MDBs) in relation to total stocks remained constant around a third of debt stocks, bondholders have emerged as the dominant creditor group, increasing from 12 percent ($25 billion) in 2008 to 25 percent ($186 billion) in 2023. Over the same period, China’s share among bilateral creditors rose from 4 percent ($7 billion) to 8 percent ($62 billion). Meanwhile, Paris Club members, traditionally providers of concessional loans, reduced their share sharply from 28 percent ($57 billion) to just 6 percent ($48 billion).

Table 1: Africa’s Public and Publicly Guaranteed External Debt Stock by creditor class, share of total, 2008 and 2023

To worsen the situation, the region that borrows most expensively from bond markets is Africa, as Figure 2 shows. Between 2020-2024, the average bond-yield for African countries reached 9.8 percent, compared to advanced countries like Germany that could borrow at below 1 percent.

Figure 2: Sovereign Bond Yields (average 2020-2024) in Germany, US and different world regions, in percentage

It then comes as no surprise that external debt service is eating up almost 15 percent of Africa’s external exports earnings and undermining the region’s ability to import intermediary goods and technology to support development, as well as basic consumption. As Figure 3 shows, in 2023, African countries spent an average of 14.8 percent of their export earnings on external debt service—up from 4.5 percent in 2011 and 13.3 percent during the HIPC period in 2001. The burden has shifted toward interest payments: in 2001, interest accounted for 3.7 percent of exports and rose to 4.7 percent in 2023.

Figure 3: Africa’s Total External Debt Service (including IMF repurchases and charges) as share of their Exports of goods, services and primary income, 2000-2023

Beyond external debt – domestic borrowing and squeezing fiscal space

After the COVID-19 pandemic, many African countries lost access to affordable external borrowing and were forced to rely more heavily on domestic markets. This shift raised interest rates and increased pressure on capital outflows in several cases. Figure 4 shows a sharp rise in local currency borrowing costs between 2020-2024, reflecting growing pressure on governments already burdened by external debt.

Figure 4: Africa Financial Markets Index (AFMI) African Bond Index (inverted)

Due to high external and domestic borrowing costs and currency devaluation, Figure 5 shows that African countries spent 16.7 percent of government revenue on interest payments alone in 2023—excluding amortization. This is the highest among developing regions and 10.1 percentage points higher than in 2010.

Figure 5: Public debt (domestic and external) interest payment as a share of government revenues, by region, 2010 vs. 2023

For Egypt, interest payments can reach almost 75 percent of government revenue while Nigeria, Ghana, Malawi and Kenya account for 30 percent, as Figure 6 illustrates.

Figure 6: Interest payments as share of government revenues (%), 2024

Defaulting on education, health and climate

Most countries are servicing their debt on time, but this comes at the expense of essential social spending. Figure 7 shows that between 2008-2023, interest payments tripled while education spending declined. In 2023, for the first time, African governments spent more on interest than on education.

Figure 7: Government spending on education and public interest payment as a share of GDP in Sub-Saharan Africa, 2008-2023

Of the 49 African countries with available data, 30 spent more on interest payments than on public health in 2023—excluding principal repayments, as shown in Figure 8. And we estimate that on average, debt service will account for 137 percent of Africa’s annual climate finance needs between now and 2030.

Figure 8: Interest payments on public debt and health expenditure as share of GDP for African countries

What the international community can do about it?

Africa’s debt distress is not just a fiscal challenge—it’s a development emergency. The continent must ramp up investment in climate, education and health to support is development ambitions. With the G20 Summit coming to the continent for the first time, there is a unique opportunity to fix the Common Framework and enable a sustainable recovery. The Common Framework faces five main flaws, summarized in Table 2. First, it is slow, with prolonged negotiations; second, it provides minimal debt relief, preventing countries from embarking on new development paths; third, it fails to ensure fair participation from all creditor classes; fourth, it lacks linkages between debt relief and future development goals; and fifth, it excludes countries that need debt relief

Table 2: Summary of Flaws in the G20 Common Framework and Proposed Reforms for the G20 South Africa

Source: Replicated from Zucker-Marques et al. (2025).

Making the Common Framework fit for purpose would require a comprehensive reform. To simplify and accelerate debt restructuring, the G20 could introduce a two-year standstill on debt service when countries enter the Common Framework. A standstill would prevent interest from accumulating during negotiations to incentivize all creditors—official, private and multilateral—to come to the table. Moreover, during times of systemic crisis, it should move away from case-by-case negotiations to a coordinated, group-based approach, speeding up negotiation and reducing the stigma of requesting debt relief.

To enhance the debt relief envelope, it is key to rely on a more realistic Debt Sustainability Analysis that incorporates climate vulnerability and investment needs. This ensures countries have enough fiscal space to support recovery and future resilience after restructuring.

To ensure a fair creditor participation, the G20 could agree on a clear and fair Comparability of Treatment (CoT) rule that considers risk premiums and concessionality. This will help align contributions across creditor groups and avoid delays in restructuring. Moreover, it should ensure the participation of all creditor classes and use tailored instruments for different creditor classes, including bond buybacks and Brady-style deals, while replenishing MDBs to protect concessional lending.

Also, the G20 could align debt relief to sustainable development by including investment priorities—such as climate goals like Nationally Determined Contributions, the UN 2030 Sustainable Development Goals and national development strategies—during the restructuring process. Countries would commit to investing in these priorities, with support from international financial institutions.

Finally, a reformed Common Framework should allow middle-income and emerging economies experiencing debt distress to access the Common Framework, because some of these countries currently do not have access despite their need to restructure debt.

Without bold action, the African continent will bear the cost of inaction. The 2025 G20 in South Africa is a chance to change course—toward fairer, faster and development-linked debt relief.

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