W’Bank: Debt interest eats into health, education budgets across Africa

Nearly 80 per cent of sub-Saharan African countries spend more on public debt interest than on healthcare, education or both, as rising borrowing costs leave governments with less money to fund essential services, the World Bank has warned.

The bank, in its October 2026 Africa Economic Update, said interest payments averaged between 2.9 per cent and 3.2 per cent of Gross Domestic Product across the region between 2023 and 2026, putting pressure on public finances despite efforts to reduce budget deficits.

The findings highlight the growing cost of debt servicing in a region where governments face competing demands for infrastructure, social protection and investment in human capital.

The World Bank projects that sub-Saharan Africa’s fiscal deficit will decline to 3.5 per cent of GDP in 2026 from 5.6 per cent in 2020, before averaging 3.1 per cent in 2027 and 2028.

But the improvement in fiscal balances is unlikely to provide significant relief for public services unless governments can reduce debt costs or increase revenue more substantially.

Revenue is projected to rise by 2.6 percentage points of GDP between 2024 and 2026, while total expenditure is expected to increase by 2.3 percentage points.

Of the projected increase in expenditure, only 0.4 percentage point is expected to go towards non-interest spending, leaving limited room for governments to expand services and development programmes.

“In nearly four-fifths of the countries in the region, interest payments exceed public spending on health and/or education,” the report said.

The region’s primary deficit, which excludes interest payments, is projected to narrow to 0.5 per cent of GDP in 2025 from 3.1 per cent in 2020. The bank expects fiscal accounts to approach balance by 2028.

However, lower deficits do not necessarily mean governments have more money available for development when interest payments continue to consume a large share of their budgets.

The World Bank said the debt problem in sub-Saharan Africa extends beyond the volume of borrowing to the rising cost of servicing existing obligations.

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The median government debt-to-GDP ratio stood at 57 per cent at the start of 2025, almost twice the 29 per cent recorded in 2012. Although the ratio has declined from its 2023 peak of 60 per cent, the bank said the improvement conceals differences in countries’ debt positions and borrowing structures.

Domestic borrowing has accounted for more than half of public debt since 2021, becoming the region’s dominant source of government financing.

While local borrowing can reduce exposure to foreign-currency debt, it often comes with higher interest rates and shorter repayment periods than concessional external loans.

These conditions increase debt-service costs and expose governments to refinancing risks when existing obligations mature.

The World Bank warned that the diversion of public funds from productive investment could slow capital accumulation, weaken productivity and undermine poverty-reduction efforts.

Nigeria’s debt-service burden reflects the challenges identified in the report, as rising interest payments compete with infrastructure spending and other public priorities.

The country spent approximately N16tn servicing its debt in 2025, compared with N13.02tn in 2024, representing a 22.9 per cent increase, according to an analysis of Debt Management Office data.

Additional debt-service costs reached N10.61tn between June 2023 and December 2025, exceeding the N6.47tn spent on strategic infrastructure development during the period.

The increase was attributed to exchange-rate depreciation and higher domestic interest rates.

Nigeria’s domestic debt-service payments also continued to rise in 2026. The Federal Government spent N3.14tn servicing domestic debt in the first quarter, 20.3 per cent higher than the amount recorded in the same period of 2025.