Debt and security remain two of the biggest challenges facing African countries.According to Duncan Bonnett, a partner at Africa House, countries such as Ghana and Zambia are under tremendous pressure and need to take on debt relief. Nigeria has also been struggling.“There are some warning signs in Nigeria, and they do have a lot of public debt,” said Bonnett. “Zambia is also not in a particularly great position at the moment, although there has been some improvement in that market and we have started to see a bit more positivity. Ghana has not been able to gain any momentum from the oil and gas windfall and is one country that is struggling.”According to the International Monetary Fund (IMF), even before the Covid pandemic debt levels were rising in Africa. The pandemic, however, exacerbated the problem, with a negative effect on the sovereign debt situation on the continent. Subsequent economic shocks have not helped – and so debt levels have continued to trend upward.A recent report by the World Bank shows that more than half the world's low-income countries, most of which are in Africa, are either grappling with debt distress or at risk of doing so.By comparing what a country owes with what it produces, the debt-to-GDP ratio reliably indicates that particular country’s ability to pay back its debts. South Africa has a debt-to-GDP ratio of 68.8%, Ghana currently stands at 83.5%, Zambia 101% and Eritrea 175.1%.Statistics show that in 2020, sub-Saharan Africa had a total external debt stock of $702.4 billion compared to $380bn in 2012. As of 2021, the total external public debt in Africa reached $726.5bn.The United Nations has expressed its concern over the debt issue on the continent, going as far as to predict that countries such as Ghana would not be able to pay their public debts unless drastic measures are taken.A recent report found that a serious debt crisis was unfolding across developing economies, with 54 developing economies in urgent need of debt relief. While not all these countries are in Africa, a fair number are, and the risks of inaction are dire. If these countries do not get access to effective debt restructuring, poverty will rise and desperately needed investments in climate adaptation and mitigation will not happen. The UN maintains that debt restructuring cannot wait until interest rates drop, or a global recession occurs.Earlier this month, Ghanian president Akufo-Addo said it was not only the ongoing challenges around Covid hitting African countries hard, but also the war in Ukraine. “Every bullet, every bomb, every shell that hits a target in Ukraine, hits our pockets and our economies in Africa,” he said.Another growing concern around the high debt is that this could lead to the continent being caught up in a cycle of dependency, which could also have severe consequences.
