Debt reduction is excessive on the agenda in South Africa’s G2-presidency because it makes use of its internet hosting of the worldwide discussion board to champion a extra inclusive world system.
On this regard, it established the G20 Africa Professional Panel to deal with Africa’s debt disaster, amongst different points, proposing options similar to reforming world monetary buildings, enhancing native forex bond markets, and boosting home useful resource mobilisation.
The knowledgeable panel, led by former South African finance minister Trevor Manuel, emphasises a shift from support to investment-driven development, advocating reforms that decrease capital prices for African nations and enhance their company in improvement.
The panel additionally counts amongst its 25 members African Improvement Financial institution Vice chairman and Chief Economist Kevin Urama, MIT Professor Esther Duflo, former World Financial institution Chief Economist François Bourguignon, and UN Financial Fee for Africa Chief Economist Hanan Morsy.
The South African authorities stated on the finish of 2024, when the Panel was established, that African international locations would pay near $89bn in exterior debt service alone, with 20 low-income international locations at the moment susceptible to debt misery.
Greater than half of Africa’s 1.3 billion folks reside in international locations that spend extra on curiosity funds than on social points similar to well being, training, and infrastructure. Manuel highlights the truth that the shortage of fiscal house for international locations is holding again improvement.
The difficulty of debt is definitely not new to the G20. In 2022, it launched the Widespread Framework for Debt Therapies, an initiative launched to assist low-income international locations with unsustainable debt.
This aimed to offer a structured course of for coordinating official collectors and included non-public sector participation to revive debt sustainability by case-by-case debt therapies.
The initiative got here within the wake of the Debt Service Suspension Initiative, launched in 2020 to assist the poorest international locations to mitigate the affect of the Covid-19 pandemic. This expired in December 2021.
Nevertheless, the brand new initiative was criticised for being too gradual and inefficient. Solely 4 international locations (Chad, Ethiopia, Ghana and Zambia), utilized for debt therapy below its circumstances however the outcomes had been unimpressive.
Zambia, for instance, requested debt therapy in February 2021 however was solely capable of signal a Memorandum of Understanding with its bilateral collectors in April 2024. Others had been sooner however nonetheless skilled delays.
Rising debt
Africa’s debt has risen exponentially because the Closely Indebted Poor International locations (HIPC) and Multilateral Debt Reduction Initiatives of the late Nineteen Nineties and early 2000s, which provided important reduction and sharply reversed the debt-to GDP ratio.
Nevertheless, since 2012, debt ranges have risen quickly even amongst people who had been beneficiaries of the HIPC programme.
The entire exterior debt inventory of Sub-Saharan Africa grew from $425.8 billion in 2012 to $815.7 billion in 2021.
As of 2024, Africa’s complete exterior debt inventory was projected to be about $1.17 trillion, whereas the overall public debt (home and exterior) was estimated to be roughly $1.86 trillion.
Africa’s debt-to-GDP ratio has additionally worsened since 2012, with the median public debt-to-GDP ratio almost doubling from 28.8% in 2012 to roughly 59.1% in 2022 and stabilizing at round 68.6% in 2023 and 65% in 2024, in accordance with Afreximbank.
Its latest report, State of Play of Debt Burden in Africa 2024, says greater than half of African international locations are weak.
Africa’s exterior debt, dominated by long-term debt on the again largely of infrastructure financing, is extremely concentrated amongst 10 international locations.
Danger and notion
This has been exacerbated by the excessive price of borrowing, with African international locations paying punitive danger premiums based mostly on the notion of African danger. A 2023 UNDP research discovered that African nations pay about $75 billion in curiosity due to a perceived African danger premium.
The South African presidency has recognized the excessive price of capital as a major obstacle to the continent’s capacity to satisfy the UN Sustainable Improvement Targets (SDGs).
Professional panel member Urama advised the launch of the physique, “African international locations pay about 500 % extra in mortgage pursuits after they borrow from the worldwide capital markets in comparison with after they borrow from Multilateral Improvement Banks such because the African Improvement Financial institution Group or the World Financial institution.”
“Debt service prices in Africa may attain $89 billion in 2025, diverting assets away from investments in training, well being and different productive sectors,” he stated.
Dr Patrick Njoroge, former Governor of the Central Financial institution of Kenya and a member of the panel stated, “Africa is not arriving late to the temple of world affairs, we’re right here now, and it’s time our voice reshapes the agenda. This isn’t an African downside; it’s a world system failure.”
He described Africa’s present scenario as a basic alternative between servicing loans and investing in human improvement. “The worst debt disaster in a technology will not be measured by debt-to-GDP, however by the crushing trade-off: curiosity funds over training, over well being, over local weather resilience,” Njoroge stated.
The G20 in South Africa has established a Price of Capital Fee to research the structural points that result in these excessive borrowing prices of low- and middle-income international locations and supply actionable suggestions for G20 leaders.
The South African efforts complement the work carried out in organising a continental Africa Credit score Ranking Company, developed by the African Union and its companions, to offer extra correct danger assessments than their worldwide counterparts. The company might be launched in 2026.
The concern of a knock-on impact of sovereign debt defaults in Africa on different weak international locations is rising, notably from 2024 onwards when important capital repayments are due on quite a few worldwide bonds. Mortgage defaults reached the very best file in three a long time.
The Africa Professional Panel has explored methods that advance Africa’s collective pursuits by elevated voice, efficient illustration, and the achievement of a reformed and all-inclusive world financial coverage.
South Africa recognises that the Widespread Framework must be improved and has examined classes realized from previous processes.
The G20 highlighted the significance of enhancing debt transparency from all stakeholders, together with non-public collectors, who are actually a part of the complicated tapestry of debt.
There are efforts to offer a platform for international locations to share experiences and options. Throughout 2025, South Africa held a facet occasion, co-hosted with the African Improvement Financial institution, to mirror the voices of borrower international locations on debt within the G20. Fourteen international locations shared their views on debt sustainability.
An final result doc was drafted to seize their suggestions.
The Africa Professional Panel is because of produce a report on the debt downside and different points affecting Africa for the upcoming G20 Johannesburg Summit in November. It’s anticipated to offer a toolbox on the alternatives, devices and assets required to realize higher outcomes and contemplate what is required for a world sustainable-finance structure.
