Sovereign debt is a central government’s debt issued by the national government in a foreign currency in order to finance the country’s growth and development. Sovereign debt is also called public debt, and national debt. Several international mainstream media and think-tanks are portraying that Africa is at a risk of slipping in a major debt crisis.

Is Africa really at a threat?

Data from IMF shows that public debt to GDP fell at an average of 9.65 per cent from 2000 to 2008. However, following the global recession, since 2009 to 2018 public debt to GDP grew at an average of 6.9 per cent. By analyzing this growth trend, and all the alarming viewpoints being portrayed, coupled with negative effects of high debts: vulnerabilities from world market changes, implications on output, inability for a country’s economy to grow, poor negotiations, and as well as crowding-out effects on private investment: a situation when increased interest rates lead to a reduction in private investment spending. It is inevitable to think Africa is indeed at a risk of rising debts.

But why is it portrayed as alarming and threatening when developing countries have more than 50 per cent debt to GDP ratio, yet there are developed countries with debt to GDP ratio of more than 100 per cent on average? Data from IMF shows that, as of 2018, advanced economies’ government gross debt to GDP ratio was 102.6 percent on average, 84.9 percent in the euro area, 50.6 per cent in emerging markets and developing economies, and 45.4 percent on the African continent. This clearly shows that Africa is actually not at a risk of rising debts because, compared to other economies, Africa has the lowest public debt to GDP ratio.

So regardless of how low or high the public debt to GDP ratio is, I think it is important to pay attention to the country’s ability to pay and manage the debts instead of focusing on how they are rising. Dr. Donald Kaberuka stated it well, "All nations have grown by accessing capital markets and there is nothing wrong with accessing capital markets. The issue is debt sustainability and maximizing the return to development.”

A good example is data from the Ministry of Finance and Economic Planning that shows; the risk of Rwanda’s debt remains low with a present value of debt to GDP reaching 32.9 per cent against a threshold of 50 per cent.

"where by most of the debt is concessional and is taken out to finance huge investment projects that are expected to bring returns, so we are not worried about the debt levels,” Laura  Redifer- IMF staff said in 2019. So, when debt is used correctly public debt improves the economy of the country.

If a country can meet its debt obligations and also boost its development from taking on debts, I do not see how rising debts should be a problem but instead defaulting on them should be what needs to be addressed, and policies and actions to mitigate the risks that might arise promptly. For example, developing domestic financial markets to better mobilize local resources, and carefully prioritizing and selecting projects that need to be funded.

International media, academic scholars and other think-tanks will always portray issues facing Africa as alarming, but let us strive to frame our story in the right context, and not get distracted by outside entities that are serving their agendas.