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Spiralling interest rates drive African treasuries from eurobonds to derivatives
Africa Confidential
The cost of borrowing for African countries rose by a staggering 91% between 2020 and 2024, according to a report published on 15 April by the ONE Campaign. It says suggests that by 2024 African countries were paying 5.1% interest across all creditors, up from 2.7% in 2020.
High interest rates, combined with collapsing aid inflows – official development assistance to slumped by about 25% in 2025 – have delivered a double blow to African public finances. Though debt sustainability was one of the Africa-focused items on the agenda at this week’s Spring Meetings of the World Bank and IMF, there is no quick fix.
The spike in interest rates is not limited to commercial borrowing. The cost of borrowing from the World Bank’s International Bank for Reconstruction and Development rose from 1.4% to 5.2%, while China’s lending rates increased from an average of 2.5% to 5.7% in 2024.
The rise also helps explain why Senegal, Nigeria and Angola have recently opted for derivative-linked loans rather than tapping the Eurobond market. Last month, Senegal defended its decision to use Total Return Swaps (TRS) to secure more than US$750 million in financing from the Africa Finance Corporation and First Abu Dhabi Bank, arguing that the 7% yield on offer was significantly better than the 11% on offer on the Eurobond market. A handful of African countries have issued Eurobonds this year but more are likely to follow the derivatives route.
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