Africa faces $59bn debt strain, W’Bank warns

Sub-Saharan Africa's economic recovery remains steady, but a new World Bank assessment warns that mounting debt-servicing costs, geopolitical instability, and structural weaknesses are casting a shadow over the region's medium-term prospects.

The World Bank projects economic growth for the region to hold at 4.1% in 2025 and 2026, a slight downward revision from previous forecasts. This growth is primarily supported by domestic demand, including private consumption and investment, alongside accommodative monetary policies and improving external factors like a weaker U.S. dollar.

However, the bank highlights escalating external shocks as a significant threat. These include the impact of heightened geopolitical tensions in the Middle East, substantial debt repayment obligations, and persistent structural constraints hindering productivity and job creation. The external debt service burden is increasing sharply, with external public debt service projected to rise from 15.4% of revenue in 2024 to approximately 18.2% in 2025.

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External debt service pressures are rising sharply despite stabilising stocks. External public debt service-to-revenue is projected to increase from 15.4 per cent in 2024 to about 18.2 per cent in 2025.

A key concern is the dramatic increase in external debt repayments. The report indicates that principal repayments are set to surge from $37 billion in 2024 to $59.2 billion in 2025. This rise is attributed to maturing commercial loans, bond redemptions, and the resumption of payments on restructured debts. Annual repayments are expected to remain elevated between $47 billion and $50 billion from 2026 to 2028, signaling continued fiscal pressure.

The World Bank warns that debt vulnerabilities remain critically high, with about half of Sub-Saharan African nations either at high risk of or already experiencing debt distress. Low-income and lower-middle-income countries form the majority of these cases. Furthermore, rising global energy prices, fueled by Middle East conflict disruptions, are adding inflationary pressure through increased costs for oil, gas, and fertilizers, potentially leading to higher food prices and tighter monetary policies in oil-importing nations.

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The region faces a surge in amortisations, with principal repayments jumping from $37bn in 2024 to $59.2bn in 2025 due to maturing commercial bank loans, higher bond redemptions, and the resumption of payments under restructurings.