After two decades of economic progress, Africa is once again mired in debt and food insecurity. Sub-Saharan Africa grew by 5 percent between 2000 and 2010 and the region made significant development gains. Poverty declined from a high of 56 percent in 2000 to 42.1 percent in 2010. However, the COVID-19 pandemic delivered a heavy blow to Africa’s economic growth. The Ukraine-Russia war came hard on the heels of the pandemic and led to a massive food crisis in the continent. Currently, the entire region is in the midst of a severe debt crisis. More than half of Africa’s low-income countries are in debt and four African countries viz. Ghana, Zambia, Mali, and Ethiopia have already defaulted. About 39 million Africans slipped into extreme poverty in 2021 and millions are facing acute food insecurity with nearly 33 African countries in need of external food assistance. Africa’s progress on SDGs is slow and uneven. Without accelerated action and a substantial inflow of funds, the continent will not be able to achieve the SDGs.
Finance has been a major barrier to the implementation of the SDGs since their adoption in 2015. The Agenda 2030 stressed strengthening of domestic resources mobilisation and harnessing of private sector funds in addition to meeting aid commitments and innovative financing instruments. However, for most developing countries, particularly in Africa, mobilising domestic resources through taxation is hard. According to United Nations estimates, Africa faces a massive SDG financing gap of about US$ 200 billion per year. On the other hand, most of Africa is now confronted with rising debt burdens, high borrowing costs, and limited fiscal space. The public debt to GDP ratio peaked at 60 percent in 2023 and the average Sub-Saharan African country was paying about 12 percent of its revenues in interest payments, severely compromising development spending. Global crises have also affected the African investment climate more than other regions. In the aftermath of the pandemic, Africa's share in global greenfield FDI fell to its lowest in 17 years, 6 percent, while high-income countries recorded their highest-ever share, 61 percent. The cost of capital in Africa is also much higher than other regions of the world which hampers investments in key sectors such as renewable energy.
