! More than half the people on the continent live in countries that spend more on interest payments than they do on health or education.
! 900 million people live in countries that spend more on interest payments than on health care or education.
@ “40 percent of developing countries, in one way or another, are vulnerable to a debt crisis.” - M. Ayhan Kose, deputy chief economist at the World Bank
$ Nairobi owes $35 billion to foreign lenders
$ Kenya owed at least $6.7 billion to China
& “When you borrow money at an even higher rate than what you’re paying off, you’re digging an even deeper hole.” - David Shinn, lecturer @Washington University
- The continent’s foreign debt reached more than $1.1 trillion at the end of last year.

Kenya

The country’s staggering $80 billion in domestic and foreign (35 million dollars) public debt accounts for nearly three-quarters of Kenya’s entire economic output, according to a recent report from the United Nations Conference on Trade and Development.
Interest payments alone are eating up 27 percent of the revenue collected.
Kenyan president, William Ruto, had promoted the tax bill (increase in taxes) as necessary to avoid defaulting on the country’s debt, but the violent reaction to Parliament’s approval prompted Mr. Ruto to abruptly reverse course on Wednesday and reject the legislation he had asked for
International Monetary Fund and Kenyan authorities had reached an agreement on a package of comprehensive reforms and tax increases needed to get the country on a more stable financial footing.
government took out vast loans after a period of economic expansion in the early 2000s to cover the costs of infrastructure projects, including roads, railways, massive dams and rural electrification.
recent floods in Kenya destroyed infrastructure and agricultural land and displaced thousands of people.

Zambia

It took Zambia four years to work out a deal with its creditors after it first defaulted in 2020 primarily because of opposition from China, the country's single largest creditor.

Ghana

Ghana, after defaulting on billions of dollars of debt last year, reached an agreement only this week with private creditors to restructure $13 billion worth of loans.

Ethiopia

Ethiopia is struggling to work out an agreement.

Nigeria

foreign debt amounts to $40 billion
Forty percent of the country’s 220 million people live in extreme poverty.
more than a third of the revenue collected by the government is used to pay the interest on its public debt.
string of violent anti government protests inn August 2024.

Uganda

foreign creditors are owed $12 billion NYT

August 2024

Problems associated with this crisis

It leaves less money for investments that could create jobs for what is the youngest, fastest-growing population on the planet; less money to manage potential pandemics like Covid or mpox; less money to feed, house and educate people; less money to combat the devastating effects of climate change, which threaten to make swaths of land uninhabitable and force people to migrate.

Currencies depreciating

In many African countries, there has been zero per capita income growth in the past decade. The debt crisis has caused the value of many currencies to depreciate, further sapping purchasing power.

China factor

China now accounts for 73 percent of bilateral borrowing in Kenya, 83 percent in Nigeria and 72 percent in Uganda, according to the United Nations Conference on Trade and Development.

Over the past two decades, one in five infrastructure projects in Africa was financed by China, a report from the National Bureau of Asian Research found, and Chinese firms built one in three projects.

Some of them — like Kenya’s railway between Nairobi and Mombasa — have turned into showcases of corruption and blunders. Many of these large-scale infrastructure projects will never produce enough revenue to justify the costs.

Economic conditions and loan repayment prospects have soured, but China has been reluctant to offer debt relief. It has instead been holding out for repayment, extending credit swaps and rollovers that end up putting off the day of reckoning.

IMF and WB

The International Monetary Fund and the World Bank encouraged poor and middle-income countries to embrace Wall Street and seek private loans overseas in the 2010s.

As a result, governments looking to rally political support or finance development borrowed too much and creditors seeking gains lent too much.

When interest rates suddenly rose, countries were forced to take out new loans, at high costs, to repay the money they had previously borrowed.

Risk premium

Investors were also able to impose costly loan terms like higher rates on struggling nations that were sometimes on the edge of default — what’s known as a risk premium.

NYT