World reaches historic peak in public debt

The United Nations recently reported a historic peak in global public debt, reaching a staggering $97 trillion in 2023, raising concerns about the implications for debt servicing in African nations. Rebecca Grinspoon, the Secretary General for the United Nations Conference on Trade and Development (UNCTAD), shed light on the pressing issue in a recent interview with CNBC Africa. Grinspoon highlighted the alarming trend of increasing debt servicing costs despite some countries having a lower debt to GDP ratio. The primary reason behind this surge is the rise in interest rates. Many countries are now grappling with higher interest payments, leading them to allocate more resources towards servicing debt rather than investing in critical sectors like health and education. The UNCTAD report emphasized the difficult choices nations face between debt payments and prioritizing their people. Grinspoon pointed out that 25 governments are currently spending over 10% of their revenues on debt servicing, painting a concerning picture of the debt burden faced by multiple countries. She noted that the landscape of debt has shifted towards more private creditors, making debt restructuring complex and increasing the overall cost of debt. Despite Africa not being the most indebted region globally, the continent faces higher interest rates compared to developed nations, making debt servicing more burdensome. The cost of debt servicing in African countries and other developing nations remains a significant challenge, impacting overall debt sustainability. In terms of economic recovery, Grinspoon expressed a cautious outlook for 2024. While global recovery remains weak, Africa's prospects are slightly better, with an expected growth rate of three percent or more. However, the underperformance of key economies like South Africa, Nigeria, and Egypt poses challenges to the continent's overall economic outlook. Looking ahead, Grinspoon highlighted key risks that could derail Africa's economic recovery, particularly concerning public debt servicing levels. While a potential decrease in interest rates could benefit debt servicing, weak signs in trade and investment pose significant hurdles. Grinspoon urged the international community to scale up support through multilateral development banks to finance crucial investments for sustainable growth. She emphasized the need for accelerated and substantial efforts to avoid prolonged periods of low per capita growth in Africa. Grinspoon highlighted the potential opportunities for Africa, including the African free trade area and the continent's rich resources in critical minerals for the energy transition. By implementing the right policies and attracting investments to value-added sectors, Africa could pave the way for a dynamic and sustainable future. In conclusion, the UN report underscores the challenges posed by mounting public debt for African nations, urging concerted efforts to address debt sustainability, boost economic growth, and prioritize investment in key sectors for long-term development.