African debt servicing pressures rise as Gulf states expand influence

African nations are facing significant fiscal pressure as rising sovereign debt and interest payments increasingly crowd out essential social spending. According to the African Development Bank (AfDB), debt-service costs are narrowing the fiscal space available for infrastructure and healthcare. In West Africa, Nigeria and Ghana are notable examples where external debt interest payments rival or exceed public health expenditure as a share of GDP.

The AfDB reported that the share of government revenue devoted to external debt service across Africa rose from 23.7% in 2017 to 31% in 2024. This trend is linked to lower productivity, with a 1% increase in public debt associated with declines in labor and total factor productivity.

Simultaneously, the landscape of African debt diplomacy is shifting due to a more fragmented creditor base. While traditional Paris Club lenders remain active, Gulf states—including Saudi Arabia and the United Arab Emirates—have taken on dual roles as both bilateral creditors and strategic investors. Entities such as the Saudi Fund for Development and the Abu Dhabi Fund for Development provide loans for infrastructure, while sovereign wealth funds like the Public Investment Fund acquire equity in African energy and agribusiness assets. This complexity complicates debt restructuring processes, as seen in recent negotiations involving Zambia, Ghana, and Ethiopia.