Borrowing costs for African countries have surged by 91 percent in recent years, placing growing pressure on public finances and threatening spending on essential services, according to a new report.
The study by ONE Campaign, released via its data platform ONE Data, found that average borrowing rates across the continent rose from 2.7 percent in 2020 to 5.1 percent in 2024.
The increase reflects tightening global financial conditions following the COVID-19 pandemic and the economic fallout from the war in Ukraine, which pushed up interest rates worldwide.
Broad-based rise in costs
The report shows that nearly all major sources of external financing have become more expensive.
Borrowing from the International Bank for Reconstruction and Development (IBRD), traditionally one of the cheapest options for middle-income countries, saw rates climb sharply from 1.4 percent to 5.2 percent over the period.
Similarly, loans from China — long viewed as an alternative to Western financing — also became costlier, with average rates rising from 2.5 percent to 5.7 percent.
For the poorest countries, concessional loans from the International Development Association (IDA) have helped cushion the impact. However, access to such financing remains limited, with shrinking aid budgets and constrained funding pools.
“Blend” countries most exposed
The report highlights that so-called “blend countries” — those that combine concessional and market-based financing — have been hit hardest.
These include economies such as Kenya, Senegal, Benin and Ghana.
They occupy a difficult middle ground: not poor enough to rely fully on concessional loans, yet not strong enough to absorb high market borrowing costs without strain.
According to the report, the world’s ten blend countries could have saved up to US$20.8 billion between 2020 and 2024 if part of their US$40.6 billion in bond issuance had been financed through cheaper multilateral sources.
Instead, many turned to international capital markets, where borrowing costs have risen sharply.
Fiscal space under pressure
Higher debt servicing costs are increasingly squeezing government budgets, limiting resources available for critical sectors such as healthcare, education and social protection.
Multilateral lending still offers significant savings. The report estimates that for every US$100 borrowed from the IBRD, vulnerable countries saved about US$22 compared to market rates — and up to US$48 compared to implied rates for countries unable to issue bonds.
However, these options are not sufficient to meet demand, particularly as global aid flows decline.
Rising risks from global tensions
The report warns that geopolitical tensions — including the ongoing Middle East conflict — could further worsen borrowing conditions.
Two potential scenarios are highlighted: rising commodity prices fueling inflation and higher global interest rates, or slowing global growth reducing export revenues and government income.
Both outcomes would tighten fiscal space at a time when many countries are already under pressure.
Social impact already visible
The consequences are beginning to show across developing economies.
The report notes that child mortality may have risen in 2025 for the first time in decades, while between 638 million and 720 million people faced hunger globally in 2024.
Higher food and energy prices are also eroding household purchasing power, with knock-on effects for remittances and domestic consumption.
Calls for reform
To address the growing strain, the report calls for reforms to the global financial system, including expanding the lending capacity of multilateral development banks and improving access to concessional financing.
It also urges changes to debt restructuring frameworks to better reflect the realities faced by developing countries.
As borrowing costs continue to rise, the report warns that without coordinated action, African economies risk being locked into a cycle of high debt servicing and reduced development spending at a time when investment needs are increasing.
