By Ayanda Holo
In the heart of Abuja's evolving financial district, an extraordinary gathering of Africa's leading policymakers, business magnates, and international development partners took place in mid-December.
The Debt Management Forum for Africa (DeMFA), convened on December 16-17, 2024, may well be remembered as a watershed in the continent's ongoing struggle to tame the complexities of public debt. Under the auspices of the African Development Bank (AfDB), a key player in African economic development, and supported by a coalition of global and regional stakeholders, the event embodied a clear and urgent message: it is time for African countries, with the active engagement of their citizens, to reinvent their approach to public debt.
The overarching aim? To transform debt from a chronic burden into a lever for robust, inclusive, and sustainable growth.
For chief executives of global financial institutions, investors from the World Bank and private capital markets, African heads of state and parliaments, senior Treasury officials, labor leaders, and youth representatives from across the continent, the DeMFA offered a fresh blueprint.
It presented an environment to dissect hard truths and strategise solutions—grounded in rigorous economic analysis and pragmatic policymaking. The forum's essence lay in its push toward greater transparency, deeper oversight, and more meaningful citizen participation in the decisions that shape Africa's debt trajectories.
Today's Africa aspires to be an ecosystem where debt is neither feared nor romanticised, but rather managed carefully, priced fairly, invested wisely, and leveraged strategically.
A New Narrative Around African Debt
For decades, Africa's narrative around public debt has been dominated by cautionary tales and cyclical crises. External financing flows—whether from the World Bank, non-Paris Club lenders, or private creditors—often came at steep cost premiums, with "Africa risk" embedded in the pricing. The continent's leaders have frequently found themselves juggling urgent short-term needs against the spectre of rising borrowing costs and credit downgrades.
The disruptive global shocks of recent years—ranging from pandemic-related slowdowns, commodity price instability due to global market fluctuations, to climate challenges such as extreme weather events—have further strained government balance sheets.
As Professor Kevin Chika Urama, Vice President and Chief Economist at the African Development Bank Group, articulated in his opening speech, the old ways of managing African debt are no longer tenable. "The global financing architecture, while historically beneficial to some, is increasingly inadequate and unfair for Africa," Urama said.
"We face persistently high borrowing costs, restrictive lending terms, and pervasive risk premiums that distort perceptions and limit access to affordable capital." If Africa is to achieve its ambitious targets—industrialising its economies, strengthening infrastructure, spurring innovation, creating jobs, and uplifting millions from poverty—then the continent must reimagine its debt management strategies.
A Tailored Approach for Africa's Challenges
Wale Edun, Nigeria's Finance and Coordinating Minister of the Economy, emphasised that while global financial institutions like the World Bank and the International Monetary Fund have provided valuable support and capacity-building, the newly launched DeMFA is uniquely positioned to address Africa-specific needs.
"The Debt Management Forum for Africa offers a venue for home-grown dialogue, peer learning, and ultimately, the creation of practical tools that reflect our continent's contexts," Edun noted. "This is about forging innovative, long-term solutions that reduce debt distress and unlock fiscal stability."
The AfDB's ongoing partnership with African nations underscores the importance of regional ownership. For the AfDB, technical assistance is never merely about imposing solutions but empowering national actors—governments, civil servants, parliamentarians, and civil society—to navigate the labyrinth of external and domestic debt options.
This technical guidance extends from improving legal frameworks and crafting investor-friendly environments to honing transparency in debt reporting and building robust systems of public financial management.
Rising Debt, Rising Stakes
The urgency of the situation is clear. Africa's debt burdens have soared since 2010, fuelled by global economic shocks, structural weaknesses, and domestic governance gaps. Although some countries' debt-to-GDP ratios may be stabilising, the cost of servicing that debt is climbing, increasingly crowding out public investments in infrastructure, education, health, and other social priorities. Meanwhile, concessional financing, aid, and foreign direct investment flows remain inadequate in scale or come with burdensome conditions.
Urama's call was unequivocal: "International finance must be rebalanced." He advocates for channeling Special Drawing Rights (SDRs) through multilateral development banks to expand affordable finance. He argues for a fairer global credit rating system that accurately reflects Africa's realities rather than stereotyping its risks.
On the domestic front, African governments must redouble efforts to improve macroeconomic governance, curb illicit financial flows, enhance public investment efficiency, and foster a culture of accountability and transparency.
Only by ensuring that borrowed funds are invested wisely—accelerating industrialisation, bolstering productivity, and diversifying economies—will African countries harness debt as a catalyst rather than a chain.
Transparency: The Cornerstone of Trust
At the heart of sustainable debt management lies transparency. Without clear, accessible information on borrowing terms, it is impossible for key stakeholders—governments, legislators, citizens, investors, and civil society—to gauge the risks and returns of debt financing. Diego Rivetti, a senior debt specialist at the World Bank, succinctly captured the sentiment with the imperative: "Make Public Debt Public."
Rivetti explained that lack of transparency often stems not from malice, but from weak legal frameworks, underdeveloped operational standards, and inadequate institutional capacity. When citizens, parliamentarians, and investors do not know who owns their country's debt and under what terms, it erodes confidence, fosters mistrust, and may lead to mis-pricing and unsustainable lending practices.
Enhanced transparency—through voluntary disclosure of lending terms, improved domestic legal statutes, and better data reporting tools—offers a direct route to healthier creditor-debtor relationships and more stable financial architectures.
Prof. Urama stressed the urgency: bilateral creditors account for roughly 20% of Africa's external debt as of 2022. Ensuring greater openness in such arrangements, he argued, would mitigate the risk of hidden debts, opaque collateral agreements, and sudden credit freezes that can topple entire economies.
Debt Sustainability: Beyond the Buzzword
A central focus of the DeMFA was ensuring that countries do not overextend themselves. Debt sustainability is not merely a technical exercise—run through spreadsheets and formulas—it is a political and social endeavour. Will debt financing uplift the most vulnerable communities? Will it generate sufficient returns to pay for itself through enhanced productivity and revenue growth? The African Development Bank's Debt Sustainability Framework (DSF) provides a roadmap, enabling policymakers to anticipate the implications of each borrowing decision.
Professor Urama invites a paradigm shift: "Africa must change the narrative from viewing debt as a sustainability challenge to recognising it as a productivity opportunity."
Strategic investments backed by carefully chosen debt instruments can propel countries toward economic diversification and technological innovation. By aligning borrowing decisions with a rigorous cost-benefit analysis, policymakers ensure that every dollar spent today yields multiple dividends tomorrow—in jobs created, products manufactured, and markets developed.
Domestic Resource Mobilisation and Local Solutions
Amid all the calls for reform in the international financing arena, a recurring theme stood out: Africa must leverage its domestic resources more effectively. "Development is, ultimately, a do-it-yourself business," Urama reminded the forum's participants. While Africa should persist in advocating for more equitable global lending practices, it must also build local solutions—domestic debt markets, robust pension funds, local bond issues—that reduce the continent's vulnerability to external shocks.
The AfDB has pioneered efforts to deepen domestic capital markets, helping countries like Kenya and Morocco issue local-currency bonds. By strengthening these markets, governments mitigate exchange-rate risks and rely less on foreign currency debt.
Over time, more stable and accessible local bond markets mean African pension funds, insurance firms, and mutual funds can invest in the continent's own infrastructure. In the words of South African President Cyril Ramaphosa: "We must tap into Africa's own savings, unlock domestic capital, and make sure African wealth is invested in African development."
Citizen Oversight: The Missing Piece
Perhaps the most transformative message emanating from Abuja was the emphasis on citizen engagement. Political elites, CEOs, and international lenders all stand to gain from stable debt markets—but no stakeholder has a greater stake than the average citizen. Debt, after all, can influence everything from the price of bread and the quality of public education to the resilience of national healthcare systems.
Encouraging youth participation and civil society oversight in debt management decisions elevates the discourse beyond closed-door negotiations. Transparent and participatory processes ensure that borrowing aligns with national priorities and that citizens have a say in how their futures are financed.
Labor leaders, too, play a critical role, ensuring that the interests of workers—often the first to feel the impact of austerity when debt service costs spike—are factored into policy reforms.
A Debt Architecture for the Future
As the DeMFA concluded, it left behind a sense of cautious optimism. With the AfDB's sustained support and a renewed commitment from governments, investors, and civil society, African debt can be transformed into a powerful tool for prosperity. The conversations in Abuja underscored that the solution lies not in wholesale rejection or blind acceptance of debt but in its careful calibration. Africa's leaders, having absorbed these lessons, now face the test of implementation.
What emerges next should be a retooled, modernised debt architecture—one defined by fairness, transparency, local ownership, and strategic investment. The forum's ultimate legacy could be its role in helping Africa break the cycle of debt distress and lay the foundations for decades of inclusive growth. In a world of rising uncertainties, making debt work for Africa may prove to be the continent's most resourceful and impactful move.
Dr. Eric Ongunleye, Director of the African Development Institute, has made a significant pledge to immediately pursue high-level commitments, strengthen partnerships, and expand technical capacity. This immediate action is crucial for Africa's development.
Through enhanced knowledge-sharing, public awareness campaigns, and broadened debt markets, Africa will leverage the G20, chaired by South Africa, as a catalytic platform to mobilise resources and forge global consensus.
These near-term actions will stabilise debt management, sustain investor confidence, and position Africa’s borrowing as a strategic asset—ensuring that debt truly works for Africa’s inclusive, sustainable growth.
* Ayanda Holo is the President of TV BRICS AFRICA.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.