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…Driven by SA, Egypt, Nigeria
…Africa’s debt-to-GDP ratio to decline by 2028
Africa’s total external debt is expected to surpass $1.3 trillion by 2025 and continue to increase gradually through 2029, albeit at a slower pace than the sharp rise recorded between 2016 and 2022.
This is according to Afreximbank’s half-year report, which notes that the trajectory of Africa’s foreign debt has begun to stabilise amid changing global financial conditions and evolving domestic fiscal strategies.
A breakdown of the debt concentration reveals that South Africa (13.1%), Egypt (12.0%), and Nigeria (8.4%) collectively hold more than one-third of the continent’s total external debt stock. Other major debt holders include Morocco (5.9%), Mozambique (5.4%), Sudan (5.2%), and Kenya (4.1%). More than 30 percent of Africa’s foreign debt is spread across smaller economies classified under “Other.” This uneven distribution creates systemic vulnerabilities, fiscal instability in any of the major debt-holding nations could trigger ripple effects across the region through investor sentiment, trade relationships, and interconnected financial systems.
Between 2023 and 2029, Africa’s external debt structure has undergone notable changes in both volume and composition. The recent plateau in borrowing suggests a deliberate shift, driven by limited access to global capital, high interest rates, and a cautious fiscal posture among governments seeking to preserve sustainability in the face of growing debt servicing demands. While the borrowing curve remains upward, the pace of debt accumulation appears to be moderating.
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Encouragingly, Africa’s debt-to-GDP ratio is forecasted to decline by 2028, bolstered by improved economic growth and the adoption of longer-term debt instruments. Still, the continent faces stiff headwinds from persistently high borrowing costs, increased exposure to private creditors, and sustained sovereign risk. Central government debt across Africa is projected to stabilise slightly above 55 percent of GDP by 2029, down from a peak of nearly 63 percent in 2020.
Yet, the financial stress remains acute: as of 2025, 14 African countries are expected to surpass the 180 percent debt-to-exports threshold, while 25 nations will exceed the 20 percent debt service-to-revenue ratio, clear signs of enduring external fragility and fiscal strain.
Foreign exchange reserve adequacy has also weakened significantly, with 26 African countries anticipated to fall short of the IMF’s 3-month import cover benchmark in 2025.
However, the outlook for debt servicing shows a slight improvement from 2025 onward, with projections indicating a gentle decline in pressure. This shift is attributed to multiple factors: reduced levels of new commercial borrowing, better inflation control across many African economies, and the easing of global interest rates in response to monetary policy adjustments in advanced markets.
Countries that implement meaningful domestic reforms such as tightening public spending, realigning subsidies, and ramping up revenue mobilisation are likely to experience the greatest relief.
Despite the softening trend, the interest-to-GDP ratio will remain historically elevated through 2028, particularly in fiscally fragile economies like Ghana and Nigeria. This highlights the long-term challenges associated with high-cost borrowing and limited fiscal buffers. According to the report, macroeconomic stability will continue to hinge on the sustainability of public debt, which is now a cornerstone of economic risk assessment frameworks. The Debt Sustainability Analysis (DSA) is central to this evaluation, offering insight into a country’s ability to meet debt obligations through key solvency indicators such as debt-to-GDP and debt-to-exports ratios. Liquidity is assessed through metrics like debt service-to-revenue and debt service-to-exports ratios, along with reserve adequacy, creating a comprehensive picture of fiscal resilience.
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Across the continent, debt-to-GDP ratios remain elevated and uneven, reflecting the impact of divergent fiscal trajectories and macroeconomic disruptions. Based on the latest forecasts, over 60 percent of African countries are expected to exceed the 50 percent debt-to-GDP threshold in 2025, a benchmark set by the IMF-World Bank Debt Sustainability Framework (DSF). Countries like Ghana, Cabo Verde, and Sudan are set to record some of the highest debt levels, with ratios exceeding 100 percent of GDP, underscoring growing concerns over debt sustainability.
The report highlights the wide variations in national debt positions. While countries such as Djibouti, Seychelles, and Congo (Brazzaville) are projected to maintain relatively stable or moderate debt levels, others, namely Ghana, Sudan, and Zambia are facing a fast-rising debt burden. The report also compares IMF debt forecasts from April and October 2024 for 2025, showing that Djibouti, Ghana, Sudan, and Equatorial Guinea experienced significant upward revisions in their projected debt levels, exceeding 10 percentage points in some cases. In contrast, countries like Zambia, Senegal, and São Tomé and Príncipe saw downward revisions, reflecting the impact of fiscal reforms, debt restructuring efforts, or external support.
These shifts in projections emphasise just how susceptible Africa’s debt outlook remains to volatile macroeconomic trends, fiscal performance variability, and global financial developments. Higher global interest rates, particularly in the U.S. and Europe have amplified debt servicing costs for countries relying heavily on external commercial loans. Kenya, Egypt, and Nigeria are among the nations facing increased refinancing risks due to tighter global liquidity and rising bond yields.
In light of these developments, the report states that Africa’s evolving debt landscape necessitates stronger fiscal discipline, more robust debt management strategies, and enhanced coordination with international partners to navigate refinancing and restructuring challenges. Proactive policy measures will be essential in safeguarding fiscal space, managing risks, and securing long-term debt sustainability for the continent.
