Africa faces debt crisis as a significant number of countries risk collapse

In May 2025, African policymakers convened in Togo for a three-day meeting organized by the African Union to address the continent's growing debt crisis. The financial pressures on Africa are severe, with the region expected to pay nearly $89 billion in external debt servicing this year, significantly increasing from about 15% of the GDP a decade ago to around 25% now. This immense repayment burden is primarily owed to private creditors and reflects the precarious financial health of many countries on the continent. Countries like Kenya are seeking innovative solutions to their debt issues, exemplified by plans to raise funds through diaspora bonds. The meeting aims to explore homegrown financial strategies in response to lessons learned from recent defaults in Ghana and Zambia. However, the specter of debt distress remains salient, with about 20 nations identified as either currently in or at risk of such a situation. The discussions are taking place against a backdrop of broader economic uncertainties, including global trade tensions and changing policies from major economies like the United States. The potential cuts in development finance from the US and European countries are raising alarms, as African governments could be pressured to incur more debt to cover gaps in funding for essential services like health and education. This complex interplay of policies is contributing to a challenging environment for debt management in Africa. As the African Union makes proposals for reform, they illustrate significant challenges ahead. Policymakers are under immense pressure to devise sustainable financial models that can stabilize economies while mitigating the immediate risks of default. The outcomes of the Togo meeting could shape the future economic landscape for many nations in Africa and may prompt a reevaluation of engagement strategies with global financial institutions.