Shifting the Narrative on African Debt: Debt Default versus Development Default

Titled “Africa’s Public Debt Management Agenda: Restoring and Safeguarding Debt Sustainability”, the African Union’s (AU) first conference on debt took place in Lomé, Togo, from 12 May to 14 May. The three-day event brought together representatives of member states, financial institutions, civil society and development organisations, as well as financial experts and AU staff to discuss issues such as African countries’ credit ratings, innovative debt-financing instruments and the G20 Common Framework. The conference ended with the adoption of a draft declaration on debt, marking a milestone on the AU’s path towards a Common African Position (CAP) on debt.

The conference took place at a time when debt accumulation is becoming a growing concern for many African countries. According to the Global Sovereign Debt Monitor 2025, around 70 per cent of the countries in sub-Saharan Africa have a high or very high debt burden. While debt levels and creditor composition vary significantly from country to country, the rising servicing costs of non-concessional loans are particularly concerning, as they are consuming government revenues that could otherwise be spent on areas such as health and education. Because of slow global growth and the uncertainty surrounding trade tariffs, the Economist Intelligence Unit predicts that Africa’s debt burden will remain at a high-risk level throughout the period 2025–29.

Political messaging: Shifting the narrative on African debt

Just how unsustainable debt comes about, who is responsible for it and how it should be addressed are all very thorny issues. For example, to what extent have International Monetary Fund (IMF) policy conditionalities contributed to the fiscal and economic challenges faced by some countries today? Have external shocks such as the Covid-19 pandemic prevented some African countries from realising development pathways that would otherwise have been attained? Furthermore, are international credit rating agencies unable to adequately capture the way in which African (informal) economies work and are thus the main cause of the African “risk premium” and higher borrowing costs? While many of the questions surrounding sovereign debt are related to technically complex matters (e.g., the methodologies of credit rating agencies), they also touch on politically sensitive issues such as global power inequality, as well as poor local governance and rent-seeking practices.

The conference proceedings highlighted that African stakeholders have an interest in ensuring that the answers to these questions are not given mainly by external entities such as the IMF, the World Bank and the rating agencies, particularly at a time when the global discourse on development financing is changing and funds are becoming scarce. To this end, African stakeholders – including the AU Commission – are seeking to exercise greater influence over the global discourse on Africa’s debt situation and financing needs, offering perspectives from the continent itself; not least, the goal is to inspire confidence among creditors, investors and domestic constituencies.

The following key messages aimed at shifting the global narrative on Africa’s debt situation came from members of the panels and the audience during the conference. 

1) Global attention should shift to the development default risk.

Amid growing concerns about the debt burden of African countries, the risk of debt defaults is attracting significant global attention. There is a widespread (though not universally shared) view that defaults are to be avoided because of their long-lasting negative economic impact on the affected countries and the danger of investors losing confidence. However, several conference participants emphasised that while the risk associated with debt distress is real, the focus should shift to the development default risk. Such defaults would occur if African countries did not receive sufficient development finance to achieve the Sustainable Development Goals. Indeed, conference participants highlighted that in order to remain on a development trajectory, governments must meet an increasing number of financing needs, including for infrastructure development, basic services and climate change mitigation, as well as for debt-servicing obligations. Therefore, more (concessional) financing is needed, to avoid development defaults.

2) Africa’s debt has a better track record than its reputation suggests.

As the lending behaviour of external actors has contributed to the current debt distress, cooperation practices that increase the debt burden of African countries have become unpopular. Instead, international development actors are seeking ways to implement projects without more debt being accumulated or at least with a limit on the level of debt; such vehicles include debt-for-nature swaps and World Bank guarantees. Conference participants emphasised that while such initiatives are welcome, they are not suitable for the financing of all development needs. Several speakers underscored that there is nothing inherently wrong with lending and borrowing: when it comes to bigger investments such as those in infrastructure development, some countries may still require substantial loans in the future. They went on to argue that established development paradigms – whereby governments borrow externally so that they can invest in public infrastructure in order to stimulate economic growth – remain valid and development actors should not shy away from granting loans. The key, they stressed, is to ensure that debt is productive.

3) Now is not the time to push for a complete overhaul of the global financial architecture.

Calls for reform of the global financial architecture have been made for a long time. Above all, they focus on the fairness of the system in terms of power distribution and decision-making rights and its effectiveness as a means of providing solutions to global challenges, such as the debt crisis. Reforming the global financial architecture to better serve Africa is also an objective of the AU; and “something that works for us” was a slogan frequently cited when demands for such reform were raised at the conference. However, criticism of institutions such as the IMF remained muted overall; rather, the conference discussions centred on the need for peer-to-peer capacity building as well as for regional standards and institutions, such as the African Credit Rating Agency, which would provide credit ratings for African sovereigns and corporations. It appeared that in the current climate of global uncertainty and eroding fiscal space, the priority of many conference participants was improving the existing multilateral financial institutions that provide relief, restructuring and concessional financing rather than overhauling the system as a whole. This was evident, for example, in the case of the G20 Common Framework, with several participants calling for it to be improved rather than replaced.

The Lomé draft declaration: Reforming the G20 Common Framework

The conference ended with the presentation of a draft declaration (informally) adopted by means of applause from the participants. Among other things, the document sets out specific objectives for the G20 Common Framework. They include simultaneous and coordinated negotiations across types of creditor, the suspension of debt servicing for all borrower countries embarking on debt restructuring, the expansion of eligibility criteria to include middle-income countries and the establishment of a supranational legal mechanism for enforcement purposes. According to the declaration, the priority is to first resolve the debt crisis and then ensure that Africa’s financing needs are met in a sustainable manner. Further, the declaration highlights the need for debt forgiveness on a case-by-case basis and the revision of the IMF’s allocation formula for its Special Drawing Rights.

The adoption of the draft declaration marks a milestone on the path to establishing a CAP on debt, which will be no easy feat. Debt portfolios, exposure to debt vulnerabilities and growth prospects vary widely from one African country to another. Accordingly, the draft reflects more the AU Commission’s preparatory work than consensus positions reached at the conference. Nevertheless, the adoption of this position paper at this time is a good strategic move, as it will give AU representatives leverage at the following multilateral consultations.

From 30 June to 3 July, the United Nations Fourth International Conference on Financing for Development is scheduled to take place in Sevilla, Spain. It will bring together key stakeholders in the global financial system to discuss the need for reform in those areas where debt and development finance intercept. Another forum for promoting African priorities will be the G20 Summit, which is to take place in Johannesburg, South Africa, on 22–23 November. South Africa has declared debt solutions to be a priority of its G20 Presidency. At a time when the prospects for multilateral agreements on coordinated policy responses are becoming increasingly uncertain, the positions set out in the Lomé draft declaration lay a solid foundation for African stakeholders’ participation in these upcoming consultations on debt.

Dr Karoline Eickhoff is a researcher in the project Megatrends Afrika and in the research division Africa and Middle East at the German Institute for International and Security Affairs (SWP).