African economies present a complex picture when it comes to debt. While some countries manage relatively low debt loads, others grapple with significant debt burdens. There is a significant disparity in debt levels across the continent. According to a recent Yahoo Finance report, only one African nation, Sudan, appears among the top 10 most indebted countries globally. The report delves into the current state of African debt, highlighting challenges and reasons for optimism.
According to the report, “the global debt-to-GDP ratios were on a decades-long rising trend before the pandemic. Global public debt tripled since the mid-1970s, reaching 92% of GDP or $91 trillion by the end of 2022. Private debt also tripled to 146% of GDP, reaching $144 trillion between 1960 and 2022.”
Economies reliant on a single commodity export, like Cabo Verde (tourism) or Mozambique (resources), are more vulnerable to price fluctuations and external shocks. This can disrupt their ability to service debt. Countries with a history of political unrest, like the Republic of Congo, often struggle to attract foreign investment and maintain consistent economic growth, hindering their capacity to manage debt.
While the high debt-to-GDP ratios of some countries deserve attention, it is crucial to consider the broader context. A significant number of African countries boast sustainable debt levels, especially when factoring in the continent’s promising economic prospects. Nations like Rwanda and Ghana have implemented responsible fiscal policies and boast relatively low debt-to-GDP ratios.
Here are the 5 African Countries with the Highest Debt-to-GDP Ratio in 2024
1. Sudan (238.8%)
Sudan tops the list with a concerningly high debt burden. Years of conflict and economic mismanagement have contributed to this situation. Ongoing political instability discourages foreign investment and hinders economic growth, making it difficult to generate revenue to service debt. Also, the decline in global oil prices has significantly reduced Sudan’s export earnings, further straining its ability to repay debt.
2. Cabo Verde (109.7%)
Despite its middle-income status and dependence on tourism, Cabo Verde finds itself in the 12th position globally. This highlights the vulnerability of economies reliant on a single sector, especially when faced with external disruptions like pandemics. The pandemic severely impacted Cabo Verde’s tourism industry, a crucial source of foreign exchange earnings. This reduced government revenue and limited its ability to service debt. An expanding public sector with rising personnel costs has also contributed to increased government spending and debt accumulation. Diversifying the economy beyond tourism is crucial for long-term debt sustainability.
3. Mozambique (92.4%)
Although Mozambique is rich in natural resources, East Africa ranks 21st. The country has struggled to manage resource revenues effectively, leading to high debt levels. While resource wealth can be a boon, mismanagement, and dependence on volatile commodity prices can lead to debt challenges. Implementing transparent and accountable governance practices is essential to ensure resource wealth benefits the nation.
4. Republic of Congo (91.0%)
The Republic of Congo occupies the 24th position. Years of political instability have hampered economic growth and limited the government’s ability to manage its debt effectively. Also, similar to Mozambique, dependence on resource extraction and a lack of economic diversification contribute to its debt challenges. Like Sudan, the Republic of Congo relies heavily on oil exports, making it vulnerable to fluctuations in global oil prices. A decline in oil revenue reduces its capacity to service debt.
5. Egypt (88.1%)
Egypt sits at 27th globally, demonstrating the debt burden faced by some of Africa’s most populous nations. A large population creates significant pressure on government spending, making debt control a complex issue. The Egyptian government provides extensive subsidies on essential goods like food and fuel. While these subsidies help alleviate poverty, they contribute to government budget deficits and debt accumulation. Investing in education and job creation can stimulate economic growth and alleviate some of the strain.
