David Masondo, South Africa’s Deputy Minister of Finance, on Tuesday warned of Africa’s spiralling debt crisis, urging the development of “tangible, actionable solutions” to shift the continent from distress to “long-term financial resilience and sustainable growth”.
Speaking at the Group of Twenty (G20) International Financial Architecture Working Group Debt Side Event in Pretoria, he told African representatives, international financial institutions, and private lenders that rising debt-to-Gross Domestic Product (GDP) ratios, a pivot to private creditors, and structural weaknesses demand faster debt resolution.
Africa’s debt has ballooned, especially in Sub-Saharan Africa (SSA), where World Bank data shows nominal public debt tripled since 2010 to $1.1 trillion (R20 trillion) by 2022. The median debt-to-GDP ratio in SSA jumped from 32% in 2010 to 57% in 2022, fuelled by weak debt management, poor transparency, and costly financing.
Masondo noted 22 SSA countries are now at high risk of external debt distress or already struggling, up from 20 in 2020. He blamed the Covid-19 pandemic and the Ukraine war for worsening these vulnerabilities, which crowd out funding for infrastructure, healthcare, education, and climate adaptation “is detrimental and a barrier to economic growth and development”.
The creditor landscape has shifted dramatically. A decade ago, multilateral institutions and Paris Club bilateral lenders dominated Africa’s borrowing. Today, private creditors hold sway, their share surging from 20% in 2010 to 41.3% in 2020. This switch has shortened maturities and raised refinancing risks, “making debt management for African countries even more challenging,” Masondo said.
South Africa’s Treasury reported last week that over half of Africa’s 1.3 billion people live in nations where interest payments outstrip spending on health, education, and infrastructure. This year, African countries face $89 billion in external debt service alone.
Efforts to ease the burden date back decades. In 1996, the World Bank and International Monetary Fund (IMF) launched the Heavily Indebted Poor Countries Initiative, followed by the 2005 Multilateral Debt Relief Initiative, which erased 100% of eligible debts to the IMF, World Bank, and African Development Fund for qualifying nations. The G20’s post-Covid-19 Common Framework extended relief beyond the Debt Service Suspension Initiative. Ongoing programmes like the Debt Sustainability Framework for Low-Income Countries and the Debt Management Facility - a trust fund aiding over 80 developing countries - aim to bolster transparency and capacity.
Yet, Masondo warned, “It should concern all of us that, notwithstanding all these initiatives, the public debt challenges persist.”
South Africa’s G20 Presidency is seeking solutions.“Under our G20 Presidency, we are committed to advancing an agenda that strengthens the voice of African nations in global debt discussions,” Masondo said. “Our point of departure is to have a better understanding of why, notwithstanding various initiatives from G20, and various multi-lateral institutions like the IMF and the World Bank, we still have unsustainable debt problems.”
Last month, eight former African leaders signed the Cape Town Declaration at the G20 Finance Ministers’ meeting, demanding debt relief and lower borrowing costs. Joyce Banda, the former President of Malawi, said, “Countries on the frontlines of the development crisis are the same ones grappling with record levels of debt. By 2030, these nations will need to invest up to $6.4 trillion annually to achieve sustainable development. However, this goal remains unaffordable given their overwhelming debt servicing obligations.”
Jakaya Mrisho Kikwete, the former Tanzanian President, added, “The debt crisis has been worsened by rising interest rates and a stronger dollar, making it increasingly difficult for African countries to manage dollar-denominated debt. A global solution to this crisis is not only vital for our economies but will also benefit everyone around the world."
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