Un Economist: African Countries Debt Payments Skyrocket

African countries are dedicating increasingly large sums of their revenues to servicing interest payments on debt, according to a UN economist.

Raymond Gilpin, chief economist and head of the strategy, analysis, and research team at the United Nations Development Programmes regional bureau for Africa, tells African Busine ss at the African Economic Conference in Botswana that the shift in Africas debt composition over the past two decades from concessional to commercial lending has led to a spike in the interest that countries pay on their loans. This shift to repaying creditors, he notes, comes at the expense of critical investment in sectors such as education and health.

This year the estimate is that African countries will pay about 163bn in debt service compared with 61bn in 2010. Moreover, over half of the countries on the continent are spending more on debt service payments than they are spending on health and education and that is not sustainable, he notes.

Gilpin says that the solution lies in reforming the global financial architecture to ensure that Africa accesses more concessional finance, and that commercial debt is priced more fairly. Africa currently overpays for debt that it contracts in international markets, he asserts.

The institutions that price the risk dont really understand the continent in terms of which data points really tell you about an economys ability to repay.