Concern is mounting among market watchers, investors, and non-governmental organizations. As United Nations Secretary General António Guterres recently warned, “many African countries now spend more on debt repayments than on healthcare.”2
The bigger picture
While Guterres’ warning is valid, the belief that countries deemed at high risk of debt distress are destined for a liquidity or solvency crisis doesn’t always hold, including for those that have issued Eurobonds.
In recent years, several issuers, including Angola, Nigeria, and Côte d'Ivoire, have successfully reduced their external debt burdens. Innovative instruments such as debt-for-development swaps, which allow the exchange of expensive commercial debt for cheaper concessional debt, are gaining traction. In Côte d'Ivoire, one such transaction, supported by the World Bank, created fiscal space for an additional €330 million in primary education spending over the next five years.3
Oil right on the night
Debt reductions usually happen during times of strong real growth, fiscal discipline, and falling inflation.
Angola illustrates this, where global oil prices and local production are crucial – almost 75% of government revenue comes from oil and gas.4 In 2021, the country’s debt-to-GDP ratio was 119%. By the end of 2024, it dropped to 70%, with recent data showing it further decreased to 58%.5 After 2022, resurgent oil prices helped support the current account deficit. The subsequent strengthening of the Angolan kwacha was also a boon, with around 80% of the country’s debt denominated in foreign currency.6 Proactive policy measures, including a hike in diesel prices to mitigate the impact of poorly targeted subsidies, have also had a positive effect.
According to the International Monetary Fund, the government now has an additional $3 billion to invest in education and health.7 This funding is critical in a country where income inequality ranks among the highest in Africa.
Angola is not out of the woods. Much of the debt owed to China, its largest creditor, is backed by oil. However, the country has been actively paying down this debt amid high oil prices. In 2024, Angola was one of a handful of African nations to run a current account surplus with a budget deficit of just 1%, which is no small feat.8
Lessons from Zambia
While Finance Minister Vera Daves was steering Angola toward firmer ground, Zambia chose the path of least resistance. In the run-up to the 2020 election, the government continued to spend freely on infrastructure projects, including the Batoka Gorge Hydroelectric Power Station. The result: Zambia defaulted on its debt obligations, severely limiting access to external financing.[9]
Debt in distress
Africa is not immune to debt distress. Take Senegal. Following President Faye’s election victory in April 2024, an official audit of the previous administration’s public accounts uncovered over $7 billion in hidden debt.10 The country’s debt-to-GDP ratio has since ballooned to around 120%, and gross financing needs will remain elevated for years to come.11 Faye was elected on a platform to tackle the cost of living, so it is no surprise that he has chosen not to reduce poorly targeted fuel subsidies or cut capital expenditure. But Senegal’s path to avoiding a debt restructuring is narrowing.
It’s all in the details
Whether we like it or not, bondholders’ concerns are rarely front and center in policymakers’ minds. Their decisions must balance political and social implications, with consequences for a wide range of stakeholders, not least the electorate, to whom they are ultimately accountable.
To form a more informed view, as bondholders, we must engage directly with government officials, civil society groups, local banks, journalists, and other key creditors. We cannot simply rely on market speculation, which is often misleading.
How future creditors collaborate to solve debt distress cases is a topic for another day. Today’s restructurings are more complex, with the traditional Paris Club no longer the largest creditor group. Policymakers will need to revise flawed initiatives, such as the G20 Common Framework, to reduce the duration of future restructuring negotiations. Ultimately, the road to long-term debt sustainability in Africa is much more nuanced than many believe.
Final thoughts
Africa’s debt landscape is evolving. While risks remain, especially in countries like Senegal, others, such as Angola, are making meaningful progress. For investors, we believe this means moving beyond headline figures and engaging more deeply with local stakeholders. Understanding the political landscape, the role of the regional players, and the impact of policy reforms is essential. Debt sustainability in Africa is not a binary story of crisis or stability, but a complex, dynamic picture that can create opportunities for informed investors.
Endnotes
1 "Sub-Saharan Africa: National debt in relation to gross domestic product (GDP) from 2020 to 2030." Statista, May, 2025. https://www.statista.com/statistics/805581/national-debt-of-sub-saharan-africa-in-relation-to-gross-domestic-product-gdp/.
2 "Africa 'brimming with hope and possibility': Guterres." UN News, February 2025. https://news.un.org/en/story/2025/02/1160176.
3 "Côte d’Ivoire’s Debt-for-Development Swap, Enabled by the World Bank Group, Will Free up Funds for Education." World Bank Group, December 2024. https://www.worldbank.org/en/news/press-release/2024/12/05/c-te-d-ivoire-s-debt-for-development-swap-enabled-by-the-world-bank-group-will-free-up-funds-for-education.
4 "Angola's Oil Wealth: Where Did It Go?" Shun Culture, August 2024. https://shunculture.com/article/how-can-angola-be-rich-in-oil-but-so-poor.
5 "Debt to GDP Ratio by Country 2025." World Population Review, August 2025. https://worldpopulationreview.com/country-rankings/debt-to-gdp-ratio-by-country.
6 "What are the debt challenges facing Angola?" Reuters, May 2025. https://www.reuters.com/world/africa/angolas-debt-economic-challenges-2025-05-15/.
7 "Biden tells Angolan president the US is 'all in on Africa'." Yahoo! News, December 2024. https://www.yahoo.com/news/biden-tells-angolan-president-us-161044559.html.
8 "Angola Government Budget." Trading Economics, January 2025. https://tradingeconomics.com/angola/government-budget.
9 "Zambia–Zimbabwe: the $5 billion energy gamble with the Batoka Gorge Dam." Invest Time, May 2025. https://invest-time.com/en/zambiazimbabwe-the-batoka-gorge-dam-5billion/.
10 "Explainer-Senegal's billions in hidden debt, and why it is an IMF headache." MSN, July 2025. https://www.msn.com/en-us/money/markets/explainer-senegals-billions-in-hidden-debt-and-why-it-is-an-imf-headache/ar-AA1Jeciu?ocid.
11 "Senegal working on rebasing country's GDP, finance ministry says." Reuters, July 2025. https://www.reuters.com/world/africa/senegal-working-rebasing-countrys-gdp-finance-ministry-says-2025-07-15/.
Important information
Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
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