![econlifelogotrademarkedwebsitelogo[1]](/wp-content/uploads/2024/05/econlifelogotrademarkedwebsitelogo1.png#100878)
How Water Can Reduce Traffic Congestion
June 3, 2025
Why Did Women Become More Educated?
June 5, 2025
The NY Times tells us that more than two dozen African countries have excessive debt. Consequently, they have less money to invest in job creation, in education, and for food and housing.
Today, let’s ask several basic questions about Africa’s debt.
African Debt
How much is borrowed?
Based on data from December 2024, the following graph displays a steady increase:
How much does debt cost?
Especially in sub-Saharan Africa, interest payments are soaring. As a result, close to 900 million Africans live in countries that spend more on debt service than health and education.
To service a debt, borrowers have principal to repay when the debt matures, and interest payments:
Who are the lenders?
African nations borrow from bilateral, multilateral, and private creditors. A bilateral lender is another country while multilateral institutions like the World Bank loan money to African nations. Then, the private sector with its pension funds and banks and other financial institutions are also investors that buy African debt.
You can see that China’s role is huge:
Our Bottom Line: Debt to GDP Ratios
Our last question asks how a country’s debt compares to its GDP.
When we compare debt to GDP, it is sort of like using your income to determine the size that your mortgage should be. For most of us, a million dollar mortgage would be too large when we compare it to our income. However, for a Bill Gates. it would be tiny.
Similarly, we can decide if government debt is too much by comparing it to the GDP. We just need to think of the debt as what you borrow for a mortgage and the GDP, as the value of goods and services produced in a year, rather like your income.
Calculating the percents in the following graphic, the numerator was each country’s debt, and the denominator, its GDP:
Returning to where we began, you can see that some African debt is indeed excessive:
My sources and more: Thanks to Semafor for inspiring today’s post. From there, we looked at African debt articles here, here, and here. And then the Yale Budget Lab, the Congressional Budget office, Wharton’s Budget Model, and the Visual Capitalist were our next stops.
Please note that several sentences in “Our Bottom Line” were in a past econlife post.
