Africa faces a silent debt crisis that exacerbates its vulnerability to climate shocks, hindering its economic potential. This pressing issue is highlighted in a recent policy brief by three esteemed economists, co-authored for the Debt Relief for a Green and Inclusive Recovery (DRGR) project. The brief, titled “Giving Voice to The Silent Debt Crisis: How Debt Relief Can Unlock Green Growth Pathways for Africa,” emphasizes the urgent need for debt relief as a pathway to sustainable growth.
Key Contributors and Findings
The brief was co-authored by Bogolo Kenewendo, former Minister of Investment, Trade and Industry in Botswana; Patrick Njoroge, former Governor of the Central Bank of Kenya; and Alexander Dryden, a PhD candidate at the London University’s School of Oriental and African Studies (SOAS). They explore the challenging debt dynamics in African nations and propose solutions to enhance fiscal stability and sustainable growth.
Kenewendo warns, “We are entering a decade of extreme weather events,” underscoring the urgent need for financing adaptation and resilience through comprehensive debt relief. The report identifies Africa as particularly at risk, with 17 of the 20 countries most vulnerable to climate change located on the continent, as per a 2023 UNECA report.
Growing Debt Burden
The report highlights that between 2008 and 2022, public and publicly guaranteed debt (PPG debt) in Africa surged by 240%. Countries such as Senegal, Rwanda, Mozambique, and Ethiopia saw their external debt increase tenfold. The growing debt burden constrains governments’ ability to invest in essential services without incurring further debt, leading to a concerning trend of defaults on financial obligations.
As the African Development Bank (AfDB) projects, African governments will spend approximately $163 billion on debt in 2024, up from $61 billion in 2010. The authors stress the need for drastic improvements to the global financial architecture and extensive debt relief from public and private creditors to escape this cycle.
Need for Trillions in Funding
Implementing Africa’s climate adaptation strategies will require about $2.8 trillion from 2020 to 2030, with only around 10% expected from domestic resources. The remaining 90% will need to come from international sources and private investments. However, loans have outpaced grants at a two-to-one ratio, further stressing Africa's debt profile.
The report cautions that without addressing the debt crisis, countries risk a ‘default on development,’ exacerbating underinvestment and political instability. The ongoing climate crisis, combined with external shocks like the COVID-19 pandemic and rising geopolitical tensions, has placed Africa in a precarious position.
The Role of the DRGR Project
The DRGR project, established during the COVID-19 pandemic, aims to advance innovative solutions for Africa's debt crisis amid increasing climate risks. This collaboration between Boston University’s Global Development Policy Center, Heinrich-Böll-Stiftung, and SOAS seeks to provide African countries with tools to pursue sustainable green growth.
Way Forward
The report advocates for substantial low-cost financing, comprehensive debt relief, and a restructuring of the global financial architecture. African leaders must champion these reforms in upcoming international forums to break the cycle of debt and foster sustainable growth.
In conclusion, as the economic landscape shifts, urgent action is needed to empower African nations to achieve their climate and development goals. Addressing the debt crisis is not just a financial imperative but a necessity for ensuring a resilient and sustainable future for the continent.
