Africa’s debt fatigue could lead to global catastrophe

Outlet: Arab News

Language: English

Abstract: Africa faces an impending debt crisis that could trigger widespread global economic repercussions. The continent’s debt has surged rapidly since the early 2010s, exacerbated by global commodity price shocks and the COVID-19 pandemic. As debt levels reach unsustainable heights, with an average debt-to-GDP ratio above 70%, many African nations are struggling to manage repayments, leading to severe fiscal strain. A significant shift in Africa’s debt structure has also made the situation more precarious, with private creditors and China now holding substantial portions of the continent's debt, increasing refinancing risks and making economies more vulnerable to external shocks.

The debt crisis has led to diminished investor confidence, undermining long-term development and stability in the region. This has profound global implications, as reduced foreign investment and halted development projects threaten to worsen poverty and social unrest, with potential spillovers into Europe and other parts of the world.

To address the crisis, more transparent lending practices and sustainable financing models are essential. As China pivots away from riskier loans, African countries face the challenge of securing new funding under less favorable terms while managing their growing debt distress. The broader global community, including the US and Gulf nations, has taken steps to assist, but their efforts remain piecemeal. The situation demands urgent and collective action to prevent further economic destabilization on the continent and globally.

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