In 46 developing countries, governments now spend more on loan interest payments than on either health or education, according to UN figures. Across the developing world, more than 3.4 billion people live in countries caught in this squeeze.
A hospital without medicines and a school without books often share the same underlying problem: money that could be invested in people and productive economies is instead being used to service increasingly expensive debt.
Africa feels this imbalance particularly acutely. Developing countries have historically borrowed internationally at rates two to four times higher than the US and six to 12 times higher than Germany. UNDP estimates that subjectivities in foreign credit ratings cost African countries as much as $74.5 billion through excessive interest and forgone lending.
At the United Nations General Assembly in New York in September, African leaders again called for international financial architecture and more accurate assessments of African risk.
But Africa must not only argue that its risk is mispriced. We must also produce more of the evidence that allows capital to price African opportunity differently. Trade can help us do that.
Investors want to understand what an investment will produce. Africa therefore needs more investment-ready projects with a clear economic and commercial case: the costs they will reduce, the trade they will improve, the revenues they can generate and the additional investment they can attract.
Public and concessional capital has an important role to play. It can fund prefeasibility studies, project preparation and initial risk, helping make projects bankable enough for development finance institutions and commercial investors to invest.
Trade strengthens the fundamentals on which economies are assessed.
When goods cross borders faster and at lower cost, businesses reach larger markets, exporters earn foreign currency, governments collect revenue. Stronger exports and more productive economies can, over time, strengthen investor confidence.
Realising this opportunity requires investment in the infrastructure that makes trade possible: roads connecting producers to markets, efficient ports and border posts, digital trade systems, standards infrastructure and finance for businesses to produce, process and export.
Africa should continue demanding a global financial system that prices its risk fairly. But we should not wait for that system to change.
Trade will not solve Africa’s borrowing problem on its own. But by building stronger economies, attracting investment and demonstrating measurable returns, it can help change the evidence on which Africa is priced.