African leaders to push for major debt relief at G20

African leaders will use next month’s G20 summit in Johannesburg to urge widespread debt relief to free overburdened countries from crushing international loan repayments.

External debt repayments among some of the world’s poorest countries have hit their highest level in decades, swallowing budgets meant for health, education and development.

Leaders will also argue that Africa’s debt crisis and ensuing poverty drive high emigration, saying Europe cannot stem its migration crisis without tackling the problem.

South Africa is hosting the first G20 summit to take place on African soil and Cyril Ramaphosa, president, has vowed to push the issue up the agenda.

“I think we are in a very bad shape now,” Hailemariam Desalegn Boshe, a former Ethiopian prime minister who is one of several statesmen calling for reform, told The Telegraph.

“Many developing countries are not investing at all in major areas. Rather they service debt, not necessarily the debt even, but the interest of the debt,” he said.

“If this thing continues on from year to year, I think the crisis will be so daunting and will debilitate and collapse many countries.”

Europe, he added, will be in a very difficult situation if these countries fail to tackle their debt problems.

“Very recently Europe has been shaken by migration. They think that they have resolved it, but they haven’t. If they don’t resolve the root cause of migration, which is poverty and a destitute life, then they have never solved it,” he said.

“The root cause can only be addressed if developing countries can get fiscal space, rather than paying the interest rate which is growing so very fast, like three times that of developed nations.”

Global events including Covid lockdowns, soaring inflation and rising interest rates have meant sharply growing debt repayments across many poor countries, particularly in Africa.

Debt Justice, a UK-based charity, calculates that external debt repayments by lower income country governments have tripled in the past decade and stand at their highest levels since the mid-1990s.

An increasing number of countries are having to spend more on paying back loans than on health and education.

Warnings that the system is not working are not just coming from African countries and aid charities.

Indermit Gill, the World Bank’s chief economist, said late last year: “It’s time to face the reality: the poorest countries facing debt distress need debt relief if they are to have a shot at lasting prosperity.

“A twenty-first century global system is needed to ensure fair play in lending to all developing economies.”

Anthony Kiriu, head of global markets for Africa at Absa, a Johannesburg-based banking group, said: “The challenge of debt sustainability remains significant. As of March 2025, the IMF has classified Ethiopia, Malawi, and Zimbabwe as being in debt distress, with an additional five countries at high risk of slipping into debt distress.”

A slide back into indebtedness

Dr Edward Brown, research and policy director at African Centre for Economic Transformation (ACET), said: “Across Africa and globally, there’s growing recognition that the continent’s debt crisis needs urgent action.

“The G20 is a critical moment. With the African Union Commission now a permanent member of the G20, there’s hope that Africa’s debt will be high on the agenda.”

Five years ago, the G20 created a new mechanism to help countries apply for debt relief, but only four have tried so far and it is widely seen as unsuccessful.

In the early 2000s, the IMF, World Bank and creditor countries cancelled more than £73bn ($100bn) of debt under the Heavily Indebted Poor Countries initiative (HIPC).

The relief spurred growth and infrastructure investment across the continent, but many countries have now fallen back into indebtedness.

Any similar new debt relief would now be complicated by having to tackle an explosion in private lending.

African countries have in recent years increasingly turned to private commercial lenders, who typically charge higher rates and often insist on being paid back before government or multilateral lenders.

In the past five years, 39 per cent of debt repayments from lower income country governments have been to commercial lenders, excluding China, Debt Justice estimates.

Around a third has been to multilateral bodies like the World Bank and 13 per cent to Chinese public and private lenders. Some 14 per cent has gone to other governments.

Campaigners are calling for reforms that ensure private lenders also take part in future debt relief, otherwise government and multilateral lenders will be left to foot the bill and effectively bail them out.

Debt Justice says that in recent restructurings involving Chad, Ghana, Sri Lanka, Suriname, Ukraine and Zambia, private creditors appeared to get favourable terms and were repaid 28 per cent more than government creditors.

Tim Jones, policy director at Debt Justice, said: “The way the system works is in the favour of private lenders and they have a lot of political influence.”

Much of the debt owed to private lenders by the world’s poorest countries is transacted through the City of London and governed by English law. That potentially gives the UK government a significant say in any attempts at reform and relief.

Yet while African leaders say the crisis is intensifying, Mr Jones said it was not clear the G20 would yield anything.

He said: “There is lots of momentum of people calling for debt relief and debt cancellation, there is not yet the political response from those who need to make it to ensure that happens.”

African leaders also complain that the financial ratings system is stacked against them, meaning they can only borrow at inflated rates.

Lesetja Kganyago, South African reserve bank governor, said this week that developing nations should be able to challenge ratings agencies’ methodologies to ensure greater transparency.

He said: “If we are able to take their methodology and take the data they are using and see whether we are able to replicate it… we can actually engage them and challenge them based on their methodology and say that your rating is wrong.”

Yet even if South Africa considers debt to be one of the main pillars of its G20 presidency, the country has limited leverage to get other attendees to act.

Sepo Haihambo, a former chief executive of FNB Namibia’s commercial banking arm, said: “The challenge may be, given that there is so much else going on, that it may not rank as high in priority for the other members.

“It will be acknowledged and noted, but in terms of an in depth plan, I don’t know if that will materialise.”

“I think from the other participants in G20, discussion might be about how debt restructuring and debt forgiveness isn’t a silver bullet.”

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