Africa’s mounting debt is being worsened by the growing toll of climate change, but innovative financial tools could help nations recover faster and prepare for the future.
Many African countries already face heavy repayment obligations, and the problem is deepening as climate disasters hit economies hard. Extreme weather, persistent droughts and rising temperatures — all worsened by climate change — destroy infrastructure, disrupt farming and cut into national revenues. These impacts make it harder for governments to repay loans, while also leaving fewer resources for health, education and protecting ecosystems.
Sub-Saharan Africa’s public debt stood at an estimated US$1.15 trillion in 2023. In several countries, interest payments now outweigh spending on schools or clean water. This reality has left policymakers searching for fairer ways to finance recovery in the face of climate shocks.
One option under consideration is the use of state-contingent debt instruments. These contracts, often backed by development banks or climate finance providers, adjust repayment terms when countries face predefined shocks such as a sharp drop in GDP or an extreme weather event.
If triggered, they allow repayments to be paused, reduced or rescheduled, giving governments the breathing space to focus on recovery. Jamaica’s catastrophe bonds, Rwanda’s sustainability-linked bonds, and GDP-linked bonds used in other regions show how these tools can work in practice.
Research by Magalie Masamba, an expert in sovereign debt and climate finance at the University of Pretoria, found that while these tools can help, their design is critical. Poorly defined triggers, high premiums and lenders’ reluctance, especially in countries with low credit ratings, can limit their effectiveness.
For Africa, Masamba said the G20 presidency held by South Africa in 2025 offers a unique chance to push for fairer debt rules. She calls for a multilateral framework for sovereign debt restructuring that brings together all creditors and debtors, prioritising resilience-building investments over rigid repayment schedules.
Such reforms would help ensure that debt, climate and development challenges are treated as interconnected. South Africa, working with the African Union, could present a united position at global summits such as COP30 and the International Conference on Financing for Development.
Experts also emphasised that design must reflect local realities. For example, GDP statistics may miss large parts of the informal economy in African countries, so debt triggers should consider more accurate and inclusive indicators. Governments must take the lead in shaping contracts to ensure they fit national priorities without adding long-term risks.
Technical capacity is another priority. African nations will need stronger legal, economic and climate expertise to negotiate and manage these contracts effectively. Multilateral lenders and regional development banks can help build this capacity.
The core principle, Masamba says, is that African nations should not shoulder the cost of a climate crisis they did not cause. Reforming the international debt system to be fair, transparent and responsive to climate realities is not just an economic need; it is a matter of justice.
