For the longest time, debts have largely been associated with the continent of Africa, the dark and very underdeveloped part of the earth as projected by the Western media. Painting a picture of pain, misery and pity for African countries plagued by massive debts.
This is not to say that other countries outside the shores of Africa don’t face the same challenges of debt. The issue here is the profane focus on Africa as the black sheep of the world who deserves nothing but conquest and at best apathy. Former President of Burkina Faso and Pan-Africanist, Thomas Sankara once said, ‘Debt is a cleverly managed reconquest of Africa’. It is hard to argue this assertion given the disposition of things and the narrative about Africa.
Africa’s total external debt in 2022 was $1.12 trillion; as of the end of 2023, the African Development Bank Group projected that it had increased to $1.152 trillion. There will be no shortage of difficulties in 2024 with interest rates around the world at their highest point in forty years and African countries’ bond debt securities coming due. From $61 billion in 2010 to $163 billion in 2024, Africa’s debt service payments will increase significantly.
It offers a fresh perspective when tales of countries in Europe experience such a fate. As reported by Reuters, the United Kingdom’s public debt has risen to its highest since 1961. The Office for National Statistics reported that as of May, public sector net debt, excluding state-controlled banks, stood at 2.742 trillion pounds ($3.47 trillion), or 99.8% of annual gross domestic product, an increase from 96.1% the previous year.
In addition to weak growth and a spike in interest rates by the Bank of England to a 16-year high, the COVID-19 epidemic caused a massive increase in public debt in Britain. In the initial two months of the current fiscal year, borrowing in the United Kingdom amounted to 33.5 billion pounds, which is 0.4 billion more than the corresponding period in 2023 but 1.5 billion pounds less than the government’s March budget predictions.
Capital Economics consultants claimed that the less-than-expected borrowing figures indicated a decrease in public investment and would provide little solace to the incoming finance minister of the United Kingdom.
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According to Alex Kerr, assistant economist at Capital Economics, “They do little to reduce the scale of the fiscal challenge that awaits them, in part because of the upward pressure on the debt interest bill from higher interest rates.”
Why This Matters Globally
The UK’s rising debt burden carries significant implications, not just domestically, but for the global economy as well. The UK is a major player in the global financial system, and its economic health has a ripple effect on other countries.
- Investor Confidence: High levels of debt can erode investor confidence in a nation’s ability to repay its obligations. This can lead to higher borrowing costs for the UK government, impacting interest rates and potentially hindering economic growth.
- Currency Fluctuations: A weakened perception of the UK’s financial stability could lead to fluctuations in the value of the British pound, impacting international trade and investment.
- Global Interconnectedness: The global financial system is highly interconnected. If the UK’s debt situation worsens significantly, it could trigger broader instability in financial markets, potentially impacting other economies.
Beyond Africa: A Global Debt Challenge
The UK’s situation highlights the fact that excessive debt is not a problem exclusive to developing nations. Many developed economies, including the United States and Japan, also grapple with significant public debt burdens. While Africa often faces the narrative of being a debt-burdened continent, the UK’s situation highlights that developed nations are not immune.
According to Insider Monkey, between the mid-1970s and the end of 2022, the amount of public debt worldwide tripled, amounting to 92% of GDP or $91 trillion. From 1960 to 2022, private debt increased thrice to account for 146% of GDP, or $144 trillion. China has played a pivotal role in the recent surge in global debt. In a similar vein, the US has increased its percentage of GDP debt. China has a total debt of about $47.5 trillion, which is less than that of the US, which is almost $70 trillion. However, with a debt-to-GDP ratio of 251.9 in 2024, Japan is the nation with the highest debt-to-GDP ratio. This underscores the need for responsible fiscal management on a global scale.
The UK’s rising debt serves as a cautionary tale for other nations. It emphasizes the importance of striking a balance between necessary government spending and responsible fiscal management to ensure long-term economic stability. While Africa may face unique challenges, the UK’s situation reminds us that debt is a global issue requiring ongoing attention and proactive solutions.
