Africa’s median debt-to-GDP ratio has climbed to 65.5%, up from 50% before the pandemic, according to the African Development Bank’s 2025 Economic Outlook.
This mounting debt crisis is tightening credit markets and raising operational risks for businesses across the continent. More than 40% of Africa’s external debt is commercial, with 70% denominated in US dollars, leaving economies vulnerable to currency fluctuations and rising global interest rates.
The debt surge is crowding out private sector investment as governments dominate domestic borrowing. Financial institutions in countries like Ghana, Nigeria, and Kenya are increasingly directing capital toward government securities rather than business loans, driving up borrowing costs for small and medium enterprises. Import-dependent industries face additional pressure from currency depreciation, which has increased the cost of foreign inputs and dollar-denominated obligations.
Fiscal constraints are also limiting public investment in critical infrastructure. With debt servicing consuming growing portions of national budgets, governments have less capacity to address power shortages, transportation gaps, and digital connectivity needs that hamper business productivity. The African Development Bank warns that without improved debt management and domestic revenue mobilization, these constraints will persist.
While some nations have begun debt restructuring processes, experts emphasize the need for broader reforms. Strengthening public financial management, diversifying economies, and reducing reliance on foreign-currency borrowing could help stabilize business environments. For now, companies across Africa face a challenging landscape of tighter credit, currency volatility, and infrastructure deficiencies that threaten growth prospects.
