Former African presidents demand action as debt crisis reaches historic levels

Source: Reuters. Young residents carry water home after filling up a bottle at a community filling station in the informal settlement of Kanana after individuals died from cholera in Hammanskraal, South Africa, 24 May, 2023.

This declaration - announced in Cape Town on Wednesday by former Nigerian President, His Excellency Olusegun Obasanjo - marks the launch of the African Leaders Debt Relief Initiative (ALDRI), a collective effort to advocate for a comprehensive debt solution for the African continent.

Present at the meeting were the former presidents of Senegal, Malawi, Tanzania, Ghana and Mauritius, as well as the vice presidents of Nigeria and Ethiopia.

Central to the declaration, was ALDRI's urgent appeal to the G20 to heed the call to solve the financial crisis faced by the African continent: "2025 marks the first African presidency of the G20, led by South Africa. One of the key objectives of the G20 is to solve global financial crises. This is its moment of truth. In this context, we welcome the commitment expressed by His Excellency President Cyril Ramaphosa, chair of the G20, to give priority to ensuring debt sustainability for developing countries," Obasanjo said.

Debt-relief proposal

Africa is trapped in a crippling debt crisis, the worst in 80 years, Obasanjo stressed, with more than half of the population living in countries that spend more on interest payments than on education, health, or mitigating climate change.

In 2023, low- and middle-income countries collectively spent $1.4tn servicing foreign debt, with interest payments reaching a staggering $406bn. Africa, in particular, is facing disproportionately high borrowing rates, making it harder to invest in the continent’s growth and development.

According to a United Nations Development Programme report, interest payments on debt exceeded 10% of government revenue in 56 developing nations - almost twice the number of countries compared to a decade ago, Of those, 17 countries spent more than 20% of revenue on interest payments - surpassing a threshold strongly linked to default risk.

"What this does is strangulate development, and the money that should be going into essential areas like social welfare, education, health, and nutrition is instead being used to pay debt that seems interminable," Obasanjo said.

As a result, ALDRI is calling for comprehensive debt relief not only for African countries but for all developing countries including Latin America. "We would seek to subsidise not only African countries but all developing nations that need to be subsidised including Latin America. We want to reach everyone who needs to be reached," Obasanjo said.

The proposal presents a two-pronged approach: first, comprehensive debt restructuring for highly indebted countries; and second, lowering the cost of capital for all developing nations.

The debt restructuring process involves all creditors—private, bilateral, and multilateral. The second component focuses on credit enhancements through multilateral institutions to unlock affordable financing- and debt-suspension mechanisms that create fiscal space for development and climate investments.

This approach takes into account each country's unique debt burden and its country-owned sustainable growth plan.

"What is being sought is debt relief, not charity," said former Malawi President Joyce Banda. She emphasised that the debt relief is an investment in Africa's prosperous, stable, and sustainable future—and, by extension, the global economy.

"It is a precondition for the successful implementation of the African Union's Agenda 2063. A strong Africa means a stronger world. Unlocking Africa's economic potential will drive global growth, strengthen supply chains, and accelerate the green transition."

Collapse of Africa's medical systems predicted

The Cape Town Declaration follows closely on the heels of US President Donald Trump's January executive order suspending foreign aid for 90 days to reassess its alignment with his 'America First' policy. This sudden halt has had a profound impact on African and Latin American nations, which rely heavily on US assistance for health and humanitarian programmes.

Additionally, the US Agency for International Development (USAID) faces over 90% cuts in foreign aid contracts, totalling $60bn, leading to widespread programme terminations. African health leaders warn that these aid reductions could precipitate the collapse of medical systems within a few years.

Building on this context, the heads of state present at the launch of the African Leaders Debt Relief Initiative likened the current debt crisis facing developing countries to that of post-war Germany, advocating for similar large-scale capital inflows to stimulate recovery.

"The world has tackled debt crises before. Through the Marshall Plan, Germany received massive debt relief after World War II by means of the 1952 London Debt Agreement. The Brady Plan and the Highly Indebted Poor Countries (HIPC) Initiative of the 1990s proved that bold action can unlock growth. We must now act again."