African countries: Please trade more and borrow less

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OPINION

By Prof. Augustus Nuwagaba (PhD)

One of the issues being discussed globally is the growing public debt among developing countries.

Available data indicate that the total public debt in developing countries hit approximately $31 Trillion in 2024, accounting for roughly one-third of global public debt ($102 Trillion).

Some metrics focusing on external public and publicly guaranteed debt report this figure at $11.7 Trillion.

Furthermore, developing countries paid out $741 billion more in principal and interest on their external debt than they received in new financing between 2022 and 2024, which could be the largest gap in 50 years.

According to reports from the United Nations and its trade development body (UNCTAD) with data updated in 2024 and early 2025, as of mid 2025, approximately 3.4billion out of the global population of 8.2 billion people live in countries that spend more on interest payments on debt than they pay on health and education. To put it into an illustrative analysis, nearly half of the global population lives in nations facing a severe debt-driven development crisis, implying that debt repayments prevent governments from investing in essential public services.

The issue of developing countries spending more on debt servicing than essential service delivery seem to be a symptom of a broken global financial system rather than exclusively poor budgeting by individual countries concerned.

Other arguments to this quagmire have pointed out that local economic factors in developing countries play a crucial role, with a dominant narrative from international organisations that structural, systemic inequalities face many developing countries, to borrow two to four times more than those in rich countries. It should be noted that the higher rates of debt repayments reflect a perceived risk in developing countries exacerbated by global systems that seem negatively skewed in regard to individual developing country competitiveness.

When interest rates are high, they bleed first. There have been calls for debt relief to address debt distress in developing countries. Of course, it can help in offering them “breathing space” to redirect limited resources from interest payments towards health, education, and climate adaptation initiatives.

However, the effectiveness of debt relief is often debated as it is sometimes viewed as a double-edged sword because it might encourage irresponsible future borrowing if not paired with structural economic reforms.

But to me, relief without growth is just buying time. Why? You don’t grow by cutting debt. You grow by trading and producing more, and that’s why South-South matters. In 2023, South-South trade grew faster than trade among rich countries, and had a worth of $5.7 Trillion, which is nearly 25% of global trade, a jump from just 15% in 2005. Reports indicate that in 2024, South-South trade was increased and was estimated at $6.2 Trillion (a 7% increase from 2023).

So, what are countries doing? The opportunity is real, but many countries seem to be underusing it. More South-South trade means more jobs, more tax revenue, less borrowing, and less debt stress. Growth is the best strategy. If, for instance, Africa fully implements the African Continental Free Trade Area (AfCFTA), intra-African trade could rise by 50%, and that is growth without loans. AfCFTA presents a major opportunity for bringing tens of millions of people out of poverty and raising their incomes.

The writing is clear on the wall.

The writer is the Deputy Governor Bank of Uganda