Africa spends $90bn a year servicing debt, pays $75bn risk premium – Kenya
African countries spend about $90 billion annually servicing their debt and a further $75 billion in additional interest costs linked to high borrowing risk premiums, Kenya’s Principal Secretary for Foreign Affairs, Korir Sing’oei, has said.
Sing’oei made the remarks in Nairobi at the closing of the sixth African Conference on Debt and Development (AfCoDD VI), organised by the African Forum and Network on Debt and Development (AFRODAD).
He described the additional $75 billion as a “trust tax”, arguing that African countries are often charged higher interest rates because international lenders perceive them as riskier borrowers.
According to Sing’oei, the cost of servicing debt is forcing governments to make difficult choices between meeting their obligations to creditors and investing in healthcare, education and climate resilience. Africa, he said, needs about $1.3 trillion annually to meet its Sustainable Development Goals.
The Kenyan official argued that Africa’s debt problem is not simply a question of frequent defaults, saying African countries generally default less often than commonly assumed. Instead, he said, the continent continues to pay more to access international capital because of the risk premium attached to its borrowing.
Sing’oei called on African countries to strengthen their collective bargaining position by negotiating with creditors through the Common African Position on Debt, rather than approaching lenders individually.
The comments come amid wider calls for reforms to the global financial system, including changes to how African economies are assessed by international credit-rating agencies. African governments have argued that higher perceived risk contributes to borrowing costs that are disproportionate to their economic fundamentals.
