Between Life and Debt: How Africa is facing the worst debt crisis in a generation

Christian Aid’s new report reveals that, last year, the majority of African countries spent more money repaying external debts than on healthcare or education – and in some cases both –as the continent experiences its worst debt crisis in a generation.

As former UK Prime Minister Gordon Brown puts it in the report’s foreword “in many African countries…debt restructuring is indeed a matter of life and death”. He reflects the “scale of inequality between Africans and the rest of the world is so great that I am not sure the world will ever forgive us for failing to deliver urgent debt restructuring”.

Between Life and Debt draws on powerful testimonies from Christian Aid partners in Ethiopia, Kenya, Malawi, Nigeria and Zambia and expertise from Debt Justice to lay bare the following stark realities:

• African government external debt payments will be at least 18.5% of budget revenues in 2024. This is the highest level in 25 years and it is rising at an alarming rate.
• In 2023, the UK’s entire aid budget to Africa was £1.2bn ($1.5bn equivalent). In comparison, African external debt payments were $85 billion, meaning African countries spent over 50 times more on external debt than they received in aid from the UK (and 50% more than total aid to the region).
• Governments are having to make increasingly desperate trade-offs about where to deploy scarce resources. Thirty-two African countries now spend more on paying external debts than they do on healthcare. Twenty-five African countries spend more on external debt repayments than they do on education. Christian Aid partners highlight how re-paying debt comes at the expense of African nurses’ salaries, investment in schools and expansion of social protection measures. As a result, millions of people’s lives are left unfulfilled or cut short for want of a qualified teacher, a well-equipped health centre or a midwife.

The private lender problem

After the successful debt cancellations of the 1990s and 2000s – which saw Brown broker a G7 debt relief deal in response to calls from a powerful movement of organisations, churches and people around the world – what has gone wrong?

The current debt crisis largely stems from the 2008 global financial crisis after which private lenders hugely increased lending to developing countries in search of profits when interest rates in the global North were low. These private creditors charge the highest interest rates to lower income countries, at 6.2%. This is almost double that of Chinese lenders (3.2%), and far higher than multilateral (1%) and bilateral (1.3%) lenders. Today, the most significant proportion of most African countries’ increasing external debt payments is owed to Western private creditors.

What were already becoming increasingly untenable debts have been compounded by recent global shocks, including Covid-19, the Russia–Ukraine war, interest rate hikes by G7 countries and climate impacts – crisis upon crisis adding further financial burden on African governments and other lower income countries, while driving up the cost of debt servicing.

A colonial legacy

But to fully understand the current crisis we have to look further back. Its roots are in colonialism and in the policies the UK and other powers pursued afterwards to extract maximum value from the global South. The legacy continues, as African countries remain disproportionately reliant upon exporting raw materials, which in turn makes them more vulnerable to global economic shocks and debt distress. To this day, the design of trade and investment treaties continues to lock in terms of trade that mean more value is drained from Africa than is returned. In addition, billions in illicit financial flows continue to leave Africa, as global companies extract resources while avoiding paying taxes. This is facilitated by tax havens, including British Overseas Territories and crown dependencies, putting further pressure on governments to continue borrowing.

As Harare-based AFRODAD (African Forum and Network on Debt and Development) puts it, debt is “perhaps the single most important variable that has impacted on the way in which neo-colonialism has been entrenched on the African continent”. While many Christian Aid partners campaigning on debt across Africa are the first to point out that their governments sometimes make questionable borrowing decisions, we stand with them in also pointing to how unsustainable debt is rooted in a global economic system that has inequality and injustice baked in. The UK has a key role to play in redressing this.

The UK’s outsized role

Because the majority of debts low-income countries owe to private creditors are governed by English law – dating back to the time when the UK required its law to be used by companies operating in British colonies – the UK government has a near unique power. It can legislate to compel private creditors to cancel debts. Not only does the UK’s history mean it has added responsibility to get debts cancelled, this same history gives it disproportionate power to do so. It must use it.

If the UK fails to act we risk seeing a repeat of the mistakes of the 1980s and 1990s, when private creditors were given a free ride and left with no incentive to lend more sustainably in future. At that time, economic shocks led to global South governments struggling to repay private creditors that had provided large loans in the 1970s. Instead of private lenders having to provide debt relief, new loans from the IMF and World Bank were used to pay them off, essentially translating a private debt to a public one.

While debt cancellation by governments and international financial institutions brought huge benefits when it came, it did not address the structural causes of the debt burden. Private creditors were let off the hook, paving the way for the crisis we see today.

A UK government looking to repair relationships with African countries, based on mutual respect, should get debt legislation done. Then lending and borrowing must be put on a more sustainable footing – via a UN sovereign debt workout mechanism – so that Africa can break free from the debt burden. Going to school and giving birth with the help of a midwife should be the norm for everyone, everywhere.