The African Development Bank (AfDB) has expressed concern about the slow but ongoing progress with debt restructuring and fiscal consolidation in Africa, particularly Zambia, Ghana and Ethiopia.

According to the Bank, public debt is declining but still higher than before the Covid-19 pandemic, and underlying vulnerabilities remain elevated.

“Fiscal consolidation across the continent has helped stabilize public debt, with the debt-to-GDP ratio at around 63.5 percent, on average during 2021–23 and set to settle at around  60% starting in 2024 — halting an almost decade-long upward trend.  Despite the projected decline, major challenges remain, and debt vulnerabilities are expected to increase, stoked by higher costs due to the rise in interest rates on commercial debt and the effects of exchange rate depreciations”.

The share of external commercial debt has increased over the last two decades, with the continent’s average estimated at 43% of total external debt in 2021 from 20% in 2000.

Meanwhile, AfDB said after more than 3.5 years of increasing debt vulnerabilities across the continent, there is a glimmer of hope as governments and private creditors take the first steps toward finalizing debt restructuring.

“For example, in Zambia, which defaulted on its external debt in 2020, official bilateral creditors

led by  China ended protracted negotiations on debt restructuring and in October 2023  signed a memorandum of understanding that binds the agreement reached in June 2023 to restructure $6.3billion of the country’s debt. This progress offers some optimism for Ethiopia and Ghana, two other applicants for the Group of 20 debt moratorium”, it pointed out.

If successful and extended to all countries in debt distress or at high risk of debt distress, it added that debt relief initiatives could provide the fiscal headroom to spur growth, reinforcing domestic fiscal consolidation efforts after a series of economic shocks.