South Africa is set to host the first G20 summit on African soil, with the debt crisis affecting many developing countries at the forefront of the agenda. The summit comes as developing countries grapple with a staggering $31 trillion in global debt, double their share in 2010, according to the United Nations Conference on Trade and Development (UNCTAD).

This debt burden has led to a “snowball effect,” where deficits accumulate and turn into debt, according to Togolese economist Kako Nubukpo. African economies, with their young populations, require significant financing for education, healthcare, and job creation, but high servicing costs are undermining investments. The debt-to-GDP ratio of many developing countries is lower than that of developed nations, yet they pay more in interest payments.

In sub-Saharan Africa, public debt stands at 58.5% of GDP, compared to 117% in France, 230% in Japan, and 125% in the United States. However, between 2021 and 2023, African governments spent an average of $70 per person on interest payments, surpassing expenditures on education and health. This paradox highlights structural fragilities in many developing countries, including weak fiscal capacity and low tax revenues due to corruption.

The average tax revenue in Africa is 16% of GDP, compared to 32% in advanced economies. Furthermore, many African countries struggle with trade and budget deficits, as they do not produce what they consume. Experts argue that stronger domestic tax systems must be matched by a fairer international financial architecture. Osita Chidoka, head of Nigeria’s Athena Centre for Policy and Leadership think-tank, emphasizes that “no country can tax or cut its way out of this crisis alone. Africa must grow out of debt, supported by a fairer global financial system.”

A UNDP report estimates that the way major credit rating agencies score African countries costs the continent $74.5 billion in lost annual financing. This has led to accusations of structural bias, with some commentators arguing that the system is stacked against African countries. In response, the African Union plans to launch its own rating agency next year.

The shifting profile of creditors, with private lenders now holding 19% of low-income country debt, has made restructuring slower and more complex. Experts call for a faster and more solid framework for African debt resolution, with some proposing laws to compel private creditors to join restructuring talks. The G20 summit in South Africa provides an opportunity for leaders to address the debt crisis and work towards a more equitable global financial system.