Twenty-two African countries are now either bankrupt or at high risk of debt distress. Africa’s debt remains at its highest level in over a decade. With debt service sucking up increasingly large proportions of budgets and revenues, a wave of defaults in the world’s most vulnerable countries is likely to occur even faster than expected.

As a result of COVID-19 and the Russian invasion of Ukraine, the situation has gotten much worse. With international attention elsewhere, we ignore debt issues at our peril.

The reality is that international efforts have failed to deliver a solution. The G20’s Debt Service Suspension Initiative (DSSI) offered some limited breathing room for select countries struggling with the aftershocks of the pandemic, but expired last December.

Its successor, the G20 Common Framework for Debt Treatments, has been slow to help,  only recently offering initial relief to Zambia, one of just three countries that have applied a year and a half after its adoption. Even then, Zambia only has a promise of a deal with official creditors, and we now wait to see whether private creditors agree to offer a fair deal too. For the remaining two countries that have applied – Chad and Ethiopia –  no progress has been made

Showing that the Common Framework can work –and making the changes needed so that it does so faster– will be critical over the coming months.

What You Need to Know

• 20 million additional people at risk of extreme poverty if Africa’s 16 riskiest countries fall into debt distress.
• $64 billion in African debt payments due in 2022 (almost twice bilateral aid to Africa in 2020).
• 56% of African countries assessed are ‌bankrupt or at high risk of debt distress.
• 23% of the 2022 Nigerian federal budget will be spent on debt service; almost twice as much as will be spent on health and education combined.
• 9 percentage points increase in debt to GDP for low and middle-income countries in 2020 (which was just 1.9% the decade beforehand).
• 8% of GDP paid in interest payments by emerging markets in 2020 (1% in advanced economies).
• 5 years to recover from a debt default, which can wipe out a decade of economic and social progress.
• 41% of African countries received a downgraded credit rating during the pandemic (6% in advanced economies).

Why are we facing another debt crisis?

Even before the pandemic, African finances were tight and debt was high. Covid-19 triggered two years of further economic hardship, with an enormous need to secure financing to lessen the impact on citizens and the economy, but few options to do so.