Making international creditors credible
Africa’s ballooning debts and the need to overhaul the global financial architecture
BY DESTA GEBREHIWOT
17 August 2026
Over the years, while the rest of the world has been going through economic booms and busts, Africa has steadily been growing, with some countries ranked among the fastest-growing economies in the world. The expansion of startups and tech companies, coupled with an energetic youth population, has been fueling what could be described as a remarkable economic turnaround on the continent.
With the future looking positive, contrary to common narratives and the views of naysayers, the continent is now toiling to lift its impoverished population out of poverty. In fact, the economic growth has come against all odds. Faced with issues of peace and security, which are prerequisites for economic growth, the continent has been able to maintain steady growth.
In what could be described as a late bloomer, and against the backdrop of a cascade of crises, Africa has been growing at a fast rate, sending a positive signal to the global economy. Yet, this economic growth is marred by extreme external debt distress and burdens.
For many, the debt trap is viewed as a modern-day weapon to conquer the continent and coerce African countries into pursuing political and socioeconomic interests. Although financial mismanagement contributes to ballooning debt costs, the existing global financial architecture is choking economies, making life hard even for ordinary people.
Relatively speaking, some nations have been wallowing under the burden of debt and struggling with the fallout from external borrowing.
The UN warns that 60 percent of the world’s poorest countries are in or at high risk of debt distress, double the level in 2015. The high cost of servicing debt in developing countries, with interest rates up to eight times higher than those faced by their rich counterparts, is straining already fragile public finances.
In 2026, the debt crisis has reached a crescendo, with three billion people living in nations that spend more on interest payments than on sectors such as education and health.
While some experts try to attribute the crisis to internal woes, others question the credibility of international creditors. Some even scrutinize the very structure of the global financial system. There have been calls for an overhaul of the global financial architecture, stressing the need to reform it into one that fairly represents and responds to the needs of Africa.
From the structure of financial institutions to broken coping mechanisms, the international system favors the Northern Hemisphere. Affluent nations still hold most of the voting rights in institutions such as the IMF and World Bank. Poor nations pay much higher interest rates on loans than wealthy nations, and the system fails to help developing nations overcome sudden shocks.
Lacking a rules-based, obligatory legal framework to ensure responsible lending and borrowing, the international system falls short of serving the very principles for which it was established. In principle, the system was supposed to support developing nations and other vulnerable communities by providing access to financial support and helping alleviate poverty.
More seriously, the lack of a fair and equitable debt-resolution mechanism and tools to stop unsustainable and illicit debt accumulation has worsened the dire situation facing many nations. Consequently, developing nations have been sidelined from decision-making processes within major multilateral monetary organizations. While keeping developing nations at bay, the international system is tightly held by those who control the money, deepening inequality and injustice.
With this in play, Africa’s financial needs are burgeoning with the emergence of global predicaments such as climate change and pandemics.
The solid fact is that the least-developed nations carry the brunt of global crises despite their limited contribution to them. Developed nations, which bear major responsibility for global crises, have failed to provide the required financial commitments. The current system prevents funds from reaching where they are most needed.
With interest rates on the rise, nations are caught between two fences. The situation forces governments to choose between repaying loans and financing essential sectors.
The bottom line is that although debt is imperative to turbocharge economic growth in resource-rich countries, it is becoming counterproductive as repayment outweighs countries’ ability to pay. According to the UN, that is now the case for two-thirds of developing countries.
Albeit global monetary institutions are required to be neutral, their policies put the onus on debt recipients to prioritize market liberalization and deregulation over social equity. This, in turn, is widening income inequality.
According to the UN, developing countries lose around $500 billion every year due to higher interest rates compared with advanced economies. Public external debt interest payments hit a record $415 billion, keeping net financial outflows negative for the Global South. More than 50 low- and lower-middle-income nations spend more public revenue on debt repayment than on healthcare and education combined. Against this backdrop, experts are calling for swift and bold remedies to reform the global financial system on the basis of equality and inclusivity.
Girum Sintayehu, a Business and Finance Consultant, told The Diplomatic Society that the current system often produces unequal outcomes for African and other developing countries, which face higher risk premiums, more expensive borrowing, limited access to concessional finance, and greater exposure to global economic shocks.
The existing global financial architecture has played an important role in maintaining financial stability and supporting development, but it does not fully reflect today’s global economic realities, Sintayehu said.
“A fairer architecture should therefore be based not only on financial stability but also on equity, representation, development needs, and shared global responsibility,” he said.
Sintayehu called for reforms to the governance structures of international financial institutions to give Africa greater representation and voting power. He also said global institutions should reconsider how country risk is assessed, arguing that African economies are sometimes penalized by risk perceptions that do not adequately reflect their actual economic fundamentals.
“More transparent and development-sensitive credit-rating methodologies are needed,” he said.
He further called for greater access to long-term concessional financing, guarantees, local-currency financing, and blended finance. In his view, Africa also needs stronger mechanisms for mobilizing private capital toward productive sectors while reducing dependence on external borrowing through stronger domestic resource mobilization, regional capital markets, industrialization, trade, and value addition.
On the issue of high interest rates and debt-servicing burdens, Sintayehu said international financial institutions can make a significant contribution by expanding concessional lending, providing partial credit guarantees, and increasing the use of risk-sharing instruments that reduce the cost of capital.
“Lower perceived risk can translate directly into lower borrowing costs,” he said, emphasizing the importance of more accurate assessments of African sovereign risk.
He also called for faster and more predictable debt-restructuring mechanisms for countries experiencing genuine debt distress. Expanding access to Special Drawing Rights and other international liquidity mechanisms, particularly during periods of external shocks, would also help African countries manage financial pressures.
Sintayehu stressed that African institutions should be at the center of efforts to create a stronger African financial architecture. He identified the African Development Bank, African Export-Import Bank, African Finance Corporation, regional development banks, African central banks, pension funds, sovereign funds, and national development finance institutions as important institutions that can strengthen Africa’s financial sovereignty.
“The ultimate objective should not simply be to obtain a larger voice within existing institutions, but to build a stronger African financial ecosystem capable of mobilizing and allocating capital according to Africa’s development priorities,” he said.
He added that the African Development Bank can play a particularly important role by scaling up infrastructure financing, guarantees, private-sector investment, regional integration, and innovative financial instruments. Strengthening regional capital markets and increasing intra-African investment would also allow African savings to increasingly finance African development.
Sintayehu said closing Africa’s financing gap and achieving the Sustainable Development Goals and climate objectives would require coordinated action by governments, banks, international financial institutions, investors, development partners, and regional organizations.
Governments, he said, need to strengthen tax administration, combat illicit financial flows, improve public financial management, and create predictable investment environments. Banks and institutional investors can increase financing for infrastructure, renewable energy, agriculture, manufacturing, healthcare, education, and digital transformation.
He also highlighted green bonds, sustainability-linked finance, carbon markets, diaspora investment, public-private partnerships, and blended finance as opportunities for mobilizing additional resources.
“The key is to transform Africa from primarily a recipient of development finance into a competitive destination for long-term investment,” Sintayehu said.
On debt distress, Sintayehu emphasized that prevention should begin before a country enters a crisis. African governments need stronger debt-management offices, transparent borrowing practices, realistic debt-sustainability analyses, and better coordination between fiscal and monetary authorities.
He argued that borrowing should increasingly finance projects capable of generating economic returns, exports, employment, and government revenues rather than recurrent expenditure. He also called for stronger continental mechanisms for debt monitoring, early-warning systems, and peer learning.
When crises occur, he said, Africa needs a more predictable and faster international debt-resolution mechanism involving bilateral creditors, multilateral institutions, private creditors, and emerging creditors.
He also highlighted the human-development consequences of high borrowing costs. When governments spend a large share of public revenues on debt servicing, fewer resources remain available for hospitals, schools, clean water, sanitation, roads, electricity, and social protection.
“For Africa, affordable long-term capital is therefore not simply a financial issue. It is a development and social justice issue,” he said.
Sintayehu concluded: “The future should therefore move from an Africa that primarily seeks financing from the global system toward an Africa that is increasingly a partner, investor, rule-maker, and contributor to the global financial system.”
Speaking of the matter, UN Secretary-General António Guterres, at the 8th AU-UN Annual Conference, emphasized the need for a reformed global financial architecture that addresses the developmental needs of Africa.
Guterres highlighted the longstanding inequalities in the global financial system, pointing out that it has historically disadvantaged African countries.
“For the first time, there is a recognition that we live in an economic and financial system that is ineffective and unfair, especially toward the African continent,” said Guterres. Stressing the need to reform the international financial system, Guterres called for “more voice and power for developing countries, particularly African nations,” within global financial institutions.
To sum up, Africa’s debt crisis is no longer merely a question of borrowing and repayment; it is a test of whether the global financial system can deliver fairness, accountability, and shared prosperity.
While African governments must strengthen debt management, domestic resource mobilization, transparency, and economic governance, international creditors and financial institutions must also accept their responsibility for building a system that is more equitable, predictable, and responsive to the realities of developing economies.