Africa Is Not Broke—You’re Just Using the Wrong Calculator
“[T]he people who design these rules do not understand Africa, and the people who understand Africa do not design the rules.”
Imagine if a business—having invested heavily in roads to access new markets, solar grids to cut energy costs, and digital systems to drive productivity—was judged only by its bank balance. No recognition for assets. No consideration for future revenue. No questions about its plans or underlying fundamentals. Just a credit downgrade and higher borrowing costs. It sounds absurd. Yet this is exactly how Africa is treated in global financial markets.
The prevailing narrative around African debt is stuck in the 1990s. That story—of fiscal profligacy, weak institutions, and looming crisis—does not tell the full story. Africa’s current debt, while high, is qualitatively different. It is backed by hard and soft assets: airports, port terminals, hydropower, digital infrastructure, educated labor forces, expanding tax bases, and regional markets. But global financial systems, and the rating agencies that steer them, still treat African countries as if they remain static.
Let’s be clear: Yes, African debt-to-GDP ratios are rising. Yes, some countries face rollover risks. But what is missing from the conversation is an honest reckoning with the composition and context of that debt. According to a 2023 UNCTAD report, over 45% of African public debt is owed to multilateral and bilateral institutions, much of it for infrastructure and development. The African Development Bank (AfDB), Trade and Development Bank (TDB), and others have supported capital-intensive sectors that will pay long-term dividends—but global credit models treat these investments as liabilities without acknowledging their future yield.
Meanwhile, global financial markets operate on outdated assumptions. Most African finance ministries are never asked to explain how past borrowing has expanded productive capacity. They are rarely asked how much debt sits against export-generating infrastructure. When Ghana or Kenya is downgraded, the conversation is almost entirely about cash flows, not capital stock. But no serious economy is evaluated that way. Moody’s and S&P do not downgrade Texas or Ontario on account of fiscal deficits alone—they also weigh asset positions, institutional resilience, and long-term growth dynamics.
This context gap is not accidental. Africans are rarely at the table when the rules are made. The global debt sustainability framework is shaped by institutions and analysts who do not speak to African economists, central bankers, or infrastructure financiers. Despite the emergence of continental institutions like AfDB and TDB, the default frame is still the Paris Club, IMF, and World Bank. As Kenyan economist David Ndii noted, “the people who design these rules do not understand Africa, and the people who understand Africa do not design the rules.”
Critics may argue that if African countries face risk premiums, it's because of governance concerns, political instability, or foreign exchange volatility. These are not illegitimate points. But they do not explain why similarly placed countries in Latin America, Asia, or Eastern Europe borrow at significantly lower rates. A 2022 working paper by the Centre for Economic Policy Research (CEPR) found that African sovereign bonds face a "continent premium" of up to 3.5%, even after controlling for fundamentals. This is not just unjust—it is inefficient. It raises borrowing costs, reduces fiscal space, and heightens the very risks that investors claim to fear.
So what’s the alternative? Refinancing. Smart, structured, and regional refinancing. Africa does not need less debt. It needs better debt. Rather than treating African borrowers as distressed entities, global markets should engage them as asset-rich clients in need of liquidity support. Just as corporations refinance their obligations to free up capital for growth, African countries should be enabled to roll over debts on favorable terms—terms that reflect their fundamentals, not their postal codes.
Incentivizing refinancing over austerity is not just morally right. It’s economically sound. The cost of borrowing for African countries is already punishing. Downgrades only deepen the pain. When markets overreact, countries are forced into IMF programs with conditions that suppress investment and shrink the very tax base needed to service debt. It becomes a self-fulfilling crisis.
To break the cycle, global financial institutions must evolve. They must adopt credit models that account for long-term investments, not just near-term deficits. They must consult African institutions when setting terms. And they must stop equating high interest rates with prudence. Sometimes, the most reckless thing to do is to make borrowing more expensive.
The world has changed. Africa has changed. It is time our debt frameworks caught up.
References
UNCTAD (2023). “A World of Debt: Global Debt Dynamics and Solutions.”
CEPR (2022). "Sovereign Risk Premia: Discrimination or Discipline?" Discussion Paper Series.
African Development Bank (2023). Annual Development Effectiveness Review.
Trade and Development Bank (2024). Capital Markets Report.
Ndii, D. (2023). "Rethinking Africa’s Debt." Public lecture series, Nairobi School of Economics.