Debt repayment costs are rising fast for many African countries. African governments owe a lot of money to rich countries as well as multilateral banks.
The governments in the African region were on average, spending less than 5% of revenues servicing foreign loans, by 2021 it increased to 16.5%, according to the World Bank.
Nigeria spent 86 percent of its revenue on servicing debt in 2021 which was $94.166bn, according to the Debt Management Office.
Due to these outrageous loan servicing, The World Bank has stated that Nigeria and other African Governments urgently need to restore Macroeconomic stability to protect the poor in a context of slow growth and high inflation.
This was disclosed in a press release issued by the world bank titled ”African Governments Urgently Need to Restore Macro-Economic Stability and Protect the Poor in a Context of Slow Growth, High Inflation”.
The World Bank said, “Global headwinds are slowing Africa’s economic growth as countries continue to contend with rising inflation, hindering progress on poverty reduction.
“The risk of stagflation comes at a time when high-interest rates and debt are forcing African governments to make difficult choices as they try to protect people’s jobs, purchasing power, and development gains.
Andrew Dabalen, World Bank Chief Economist for Africa stated that “these trends compromise poverty reduction efforts that were already set back by the impact of the COVID-19 pandemic.
He said “What is most worrisome is the impact of high food prices on people struggling to feed their families, threatening long-term human development.
“This calls for urgent action from policymakers to restore macro-economic stability and support the poorest households while reorienting their food and agriculture spending to achieve future resilience.
The bank said, “Debt is projected to stay elevated at 58.6% of GDP in 2022 in SSA. African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% in 2010.
“Eight out of 38 IDA-eligible countries in the region are in debt distress, and 14 are at high risk of joining them. At the same time, high commercial borrowing costs make it difficult for countries to borrow on national and international markets while tightening global financial conditions are weakening currencies and increasing African countries’ external borrowing costs.”
The World Bank also claimed that one of the world’s most food-insecure regions is suffering greatly as a result of elevated food prices. Due to recent economic shocks, instability, war, and extreme weather, hunger has drastically grown throughout SSA.
According to the bank, it is crucial to increase the effectiveness of current resources and to maximize taxes in light of the current difficult situation.