African Development Bank (AfDB) Group President, Akinwumi Adesina has said that the rise in cost of debt servicing has led to 25 countries in Africa being at risk of either high –debt distress or in-debt distress.
Adesina said African markets have had to bear the brunt from the strict monetary policies in the US and Europe.
The tough economic times has impacted interest rates and led to rising costs of debt serving. African Development Bank has warned that Africa external debt could rise from $1.1 trillion to $1.13 trillion.
“As a result, the external debt service payments due for 16 African countries will rise from $21.2 billion (Ksh 3 trillion) in 2022 to $22.3c billion (Ksh 3 .1 trillion) in 2023,” said Akinwumi.
Kenya ranks third among African countries in terms of government debt to gross domestic products (GDP).
Kenya debt to GDP ratio is currently at 64.8pc equivalent to Ksh 9.4 trillion according to the National Treasury comprising Ksh 4.7 trillion in domestic debt and Ksh 4.6 trillion in external debt.
The growth of continental loan obligations has been blamed on the adversities of COVID-19 pandemic and tightening their spending culture has caused these countries to downgrade.
The rising costs of energy and food prices from the Russian-Ukraine war and the rising costs of adapting to climate change compounded these challenges.
According to AfDB the average interest rates on debts has split over time where multilateral debts stand at 1pc and bilateral debts at 1.2pc.The tenure on the debts has also widened significantly between creditors.
“While the maturity of official debt was 30 years (for 62pc of the debt), the tenor for bonds have averaged 10 years. Thus, we now have a more short-term debt with higher interest rates,” added Akinwumi.