Across Africa, the cost of public debt is increasingly being felt far beyond finance ministries and central banks.
It can be seen in a classroom that remains overcrowded because another block was not constructed, a health centre operating without enough medicines, a road project delayed for lack of funding, or a youth employment programme reaching only a fraction of those who need it.
Borrowing is not automatically harmful. Governments use debt to build roads, power stations, water systems, hospitals, schools and other infrastructure that would be difficult to finance from one year’s revenue.
Debt becomes dangerous when repayments grow faster than government income, borrowed money fails to produce sufficient public value, currencies weaken against the denomination of the loans, or governments repeatedly borrow to repay earlier obligations.
Africa’s present challenge is therefore not simply that the continent owes money. It is that the cost, structure and repayment timetable of that debt are narrowing the choices available to governments at a time when populations are growing and demand for public services is rising.
A continent growing under financial pressure
Africa’s economy is expected to grow by approximately four per cent in 2026, although forecasts differ slightly according to the countries and indicators covered by each institution.
This growth demonstrates resilience in the face of conflict, climate shocks, expensive imports, declining development assistance and uncertainty in global markets.
Yet economic growth alone does not guarantee that governments will have enough money to improve public services.
The United Nations Economic Commission for Africa estimates that the continent’s external debt has reached approximately US$1.2 trillion.
Seven African countries are already classified as being in debt distress, meaning they are experiencing serious difficulty meeting their obligations or have begun restructuring them. A further 16 are considered at high risk.
In many African countries, more than one-quarter of government revenue is now being absorbed by debt service.
“In practical terms, this means classrooms not built, clinics not staffed or equipped, and jobs not created,” ECA Executive Secretary Claver Gatete said.
Africa’s debt burden is therefore not only a financial issue. It is a development issue affecting how much governments can spend on citizens and how quickly countries can respond to emergencies.
Debt stock and debt service are not the same
Public discussion often focuses on the total amount a country owes, known as its debt stock.
That figure matters, but it does not tell the whole story.
Debt service refers to the principal and interest payments a government must make during a particular period. A country with a large economy may manage a high debt stock where repayments are spread over many years and financed at low interest rates.
Another country may owe less in total but face a crisis because several expensive loans fall due at the same time or because government revenue and export earnings are too weak to meet the payments.
Sub-Saharan African governments spent an average of 18.7 per cent of their revenues servicing external public and publicly guaranteed debt in 2024, according to UN Trade and Development. That was three times the proportion recorded in 2014.
The World Bank separately reported that the region’s ratio of external public debt service to government revenue doubled from nine per cent in 2017 to 18 per cent in 2025.
These figures help explain why a country may report economic growth while ministries, districts and public agencies continue facing severe financial shortages.
Why African governments borrow
Governments borrow for many legitimate reasons.
Large infrastructure projects may require more money than a government can raise immediately through taxes. Borrowing allows the cost to be spread across the years during which citizens and businesses will benefit from the investment.
Countries also borrow when responding to wars, droughts, floods, disease outbreaks, food crises or sudden increases in fuel and fertiliser prices.
The COVID-19 pandemic forced many African governments to increase spending at a time when revenue from trade, tourism, businesses and employment was declining.
Borrowing can also be used to cover annual budget deficits, support currencies, refinance earlier debts or maintain essential services during economic downturns.
The quality of the investment is therefore as important as the amount borrowed.
A loan used to build reliable electricity infrastructure, improve agricultural productivity or connect producers to markets may generate economic activity and revenue capable of supporting repayment.
A loan used for an overpriced project, poorly planned investment or expenditure that creates no lasting value leaves citizens responsible for repayment without receiving an equivalent public benefit.
How repayments crowd out public services
Every government budget involves choices among competing priorities.
Revenue may be required for teachers, health workers, security, pensions, roads, electricity, water, agriculture, debt payments and local government services at the same time.
Debt repayments are legally binding obligations. Governments that fail to pay may lose access to future financing, face court claims, suffer credit-rating downgrades or experience disruption in relations with lenders.
As a result, debt service is often prioritised even when other sectors are underfunded.
In 2025, African governments paid more than US$100 billion in public debt repayments, according to the UN Economic Commission for Africa. The institution noted that many countries were paying more to creditors than they were spending on critical social sectors.
The consequence is known as fiscal crowding out: an increasing share of limited revenue is committed to debt, leaving less for development and public services.
Governments may respond by postponing infrastructure projects, limiting recruitment, reducing subsidies, increasing taxes or cutting budgets for ministries and local authorities.
Such adjustments can help stabilise public finances, but poorly designed cuts may also weaken health systems, education, food security and economic growth.
The burden of foreign-currency debt
Many African governments borrow in United States dollars, euros or other foreign currencies because local financial markets may not be able to provide enough long-term capital.
Foreign-currency loans create additional risk.
Government revenue is mainly collected in local currency, while external repayments must be made in the currency specified by the lender.
When a national currency loses value against the dollar, the local-currency cost of servicing the same foreign loan increases even where the amount owed in dollars has not changed.
A government may therefore collect more tax revenue in local currency but still struggle to meet external obligations because the exchange rate has moved against it.
Currency depreciation can also increase the cost of fuel, medicine, machinery and other imports, creating simultaneous pressure on both government and household budgets.
This makes exchange-rate stability, export growth and sufficient foreign-exchange reserves important parts of debt sustainability.
Why Africa often pays more to borrow
African countries frequently borrow at higher interest rates than wealthier economies.
Lenders consider political risk, economic stability, export earnings, debt-management capacity, institutional strength and the likelihood of repayment when determining interest rates.
Credit ratings also influence the rate at which countries can issue bonds in international markets.
The Economic Commission for Africa argues that some African countries are being charged more than their economic fundamentals justify because rating systems and investor perceptions do not always capture reforms, resilience and long-term potential accurately.
ECA estimates that at least 16 African countries are paying more in debt service than their fundamentals justify, producing a cumulative financing loss exceeding US$74 billion.
Only Mauritius and Morocco currently hold investment-grade sovereign ratings, while several African countries remain unrated.
An unrated or poorly rated government may struggle to access affordable long-term financing, even where it requires capital for productive projects.
High interest rates can then create a damaging cycle. Expensive debt increases repayment pressure, repayment pressure weakens public investment, and weaker investment reduces the economic growth needed to improve creditworthiness.
Domestic borrowing also has consequences
Governments also borrow from domestic banks, pension funds, insurance companies and other investors through treasury bills and bonds.
Domestic debt avoids some foreign-exchange risk because it is usually denominated in local currency.
It can also help develop national financial markets and provide local institutions with relatively secure investment products.
However, heavy government borrowing at attractive interest rates can draw money away from private businesses.
Banks may prefer lending to government instead of financing small enterprises, manufacturers or farmers whose activities are considered riskier.
This can increase the cost of private credit and reduce business investment, expansion and employment.
Domestic debt can also create pressure when large amounts mature within a short period and must be repaid or refinanced at higher interest rates.
The challenge is therefore to balance the government’s need for financing with the wider economy’s need for affordable capital.
Not every infrastructure project pays for itself
Governments often justify borrowing by pointing to roads, railways, airports, power stations and other major projects.
Infrastructure can transform economies by reducing transport costs, expanding trade, improving electricity access and connecting communities to markets and services.
But the existence of a physical project does not automatically mean that the debt used to finance it was productive.
A project may be too expensive, poorly located, delayed for years or completed without the systems required to operate and maintain it.
Cost overruns and repeated contract variations can increase the final debt burden without producing equivalent additional value.
Some investments generate economic benefits but little direct government revenue, meaning repayment must still come from taxes or new borrowing.
Before taking on major debt, governments should therefore publish credible feasibility studies, expected costs, repayment terms, economic benefits and the risks citizens will carry if projections are not achieved.
Transparency protects the public
Citizens cannot evaluate public borrowing where loan terms, guarantees and repayment obligations are not disclosed.
Public debt figures may also be incomplete when state-owned enterprises borrow with government guarantees or when authorities enter contracts that create future payment obligations outside the ordinary budget.
These liabilities may remain less visible until an enterprise fails to repay and the government becomes responsible.
Debt transparency requires complete and timely records showing who borrowed, from whom, for what purpose, at what interest rate and under which repayment conditions.
Parliaments, auditors and the public should be able to examine whether the borrowing was lawfully approved and whether the financed project delivered the promised results.
UN Trade and Development has been supporting African countries to improve digital debt-management systems so governments can record obligations accurately, assess risks and produce reliable reports.
Zambia, for example, introduced an updated centralised debt-management platform shared by its Ministry of Finance and National Planning and the Bank of Zambia.
Better systems cannot eliminate political interference or corruption on their own, but they make it more difficult for significant obligations to remain unknown.
When repayment becomes impossible
A country that cannot meet its obligations may enter debt restructuring.
Restructuring can involve extending repayment periods, lowering interest rates, reducing the amount owed or exchanging old debt for new instruments with more manageable terms.
The process is often slow because modern public debt can involve several groups of creditors, including multilateral institutions, foreign governments, international bondholders, commercial banks and domestic investors.
Each creditor may hold different legal rights, repayment terms and expectations.
Zambia became the first country to restructure its post-pandemic debt under the Group of Twenty Common Framework after defaulting in 2020.
By early 2026, it had reached agreements covering most of the debt included in the restructuring process, although negotiations with some creditors were continuing.
Ghana has also made substantial progress in restructuring domestic and external debt, while Ethiopia continues negotiations under the Common Framework.
These experiences demonstrate that restructuring can restore financial stability, but the process may take years and require difficult reforms affecting taxes, public spending and state-owned enterprises.
Countries need faster and more predictable restructuring mechanisms so that financial distress does not suspend development indefinitely.
Debt relief should protect development
Debt restructuring should not be judged only by whether a country begins paying creditors again.
It should also create enough fiscal space for the government to restore essential services and invest in economic recovery.
A restructuring that reduces repayments temporarily but leaves schools, health facilities and infrastructure without resources may stabilise accounts without resolving the underlying development crisis.
Governments and lenders should therefore protect priority social expenditure during debt adjustments.
Debt-for-development arrangements can also redirect part of expected repayments towards agreed national investments.
In June 2026, the African Development Bank backed a Zambian debt-for-development operation under which the government committed US$275 million in expected debt-service savings to investments in the energy sector.
Such arrangements must be transparent and carefully monitored, but they demonstrate how debt relief can be connected directly to development outcomes.
Domestic revenue must rise fairly
African countries cannot depend entirely on new loans, aid or external debt relief.
They also need to collect and manage more of their own revenue.
This does not mean increasing taxes indiscriminately or placing a heavier burden on low-income citizens and small informal businesses.
Governments can improve revenue by reducing tax evasion, reviewing unnecessary exemptions, strengthening customs systems, taxing profitable economic activity fairly and improving accountability for public expenditure.
Citizens are more likely to comply with taxes when they can see credible connections between the money collected and the services provided.
Domestic revenue mobilisation must therefore be accompanied by transparent budgeting, effective procurement and action against corruption and waste.
Collecting more money without improving how it is spent will not solve the debt problem.
Africa needs deeper financial markets
Africa possesses significant financial resources through pension funds, sovereign wealth funds, insurance companies, banks and private savings.
However, these resources are fragmented across national markets and may not be available for long-term development investment.
Deeper regional capital markets could allow governments and businesses to raise more financing in African currencies and reduce dependence on expensive foreign borrowing.
Regional guarantee mechanisms could also help lower perceived risk and attract investment into infrastructure, industry and climate resilience.
The African Development Bank has called for a new African financial architecture involving stronger pan-African institutions, integrated capital markets and guarantee mechanisms capable of reducing financing costs.
This approach will require strong regulation, credible institutions and cooperation among governments. It cannot replace responsible budgeting, but it can expand the range of financing options available.
Trade and industrialisation remain central
Debt becomes easier to manage when economies produce more valuable goods and services, create formal employment and earn foreign currency through exports.
Many African countries continue exporting raw commodities while importing processed products, machinery, fuel and manufactured consumer goods.
This pattern limits export earnings and leaves economies exposed to fluctuations in commodity prices.
Investment in regional value chains, manufacturing, agro-processing, pharmaceuticals, energy and digital services can strengthen revenue and foreign-exchange earnings.
The African Continental Free Trade Area offers an opportunity to expand markets beyond national borders, but trade requires reliable transport, electricity, standards, finance and efficient border systems.
Productive transformation is therefore part of the debt solution. Countries cannot permanently reduce debt vulnerability through budget cuts alone.
Citizens will carry the consequences
Public debt is sometimes discussed as though it belongs only to governments and financial institutions.
In reality, citizens repay it through taxes, reduced public services, inflation, delayed investment and the economic opportunities that are lost when government resources are constrained.
Young Africans may carry the longest consequences because loans signed today can require repayment for decades.
They may also inherit infrastructure and economic systems created by the borrowing. This is why the quality of the investment matters so greatly.
Debt that expands electricity, production, education and trade can support future generations. Debt that finances waste, corruption or poorly designed projects transfers obligations without transferring equivalent benefits.
The question is not whether Africa should borrow
Africa requires enormous investment in infrastructure, health, education, climate resilience and job creation. Tax revenue alone cannot immediately finance every need.
The continent will continue borrowing.
The central questions are whether the financing is affordable, whether the terms are transparent, whether projects are productive and whether repayments leave governments enough room to serve their people.
A responsible debt strategy must combine better project selection, full public disclosure, stronger domestic revenue, local-currency financing, productive investment and quicker restructuring where obligations have become unsustainable.
International lenders and financial institutions also have responsibilities. Africa cannot build sustainable economies while paying structurally higher financing costs or waiting years for debt relief after a crisis has already damaged essential services.
Economic growth should eventually be visible in functioning classrooms, staffed clinics, reliable infrastructure and expanding employment.
When debt repayments repeatedly prevent those outcomes, the problem is no longer only how much a country owes. It is whether the global and national financing systems are allowing development to take place at all.
