Africa needs to borrow to grow its economy, but it must seek innovative alternative sources of finance.
In the past, African government borrowing largely took the form of loans from development financiers such as the World Bank or International Monetary Fund (IMF).
But following a decade of strong growth, African nations are increasingly turning to international markets to issue debt.
In its 2016 report on economic development in Africa, the United Nations Conference on Trade and Development (Unctad) analysed debt dynamics and development on the continent.
It found that African external debt ratios were manageable despite rapid growth in debt accumulation in recent years.
The average African country saw its external debt stock grow by 7.8% a year between 2006 and 2009.
This accelerated to 10% a year between 2011 and 2013, reaching $443-billion, or 22% of gross national income by 2013.
According to its emerging market debt report for July 2016, credit ratings agency Moody’s said debt is now growing faster than gross domestic product (GDP) and foreign exchange reserves for many emerging market countries.
But, Moody’s said, the Middle East and Africa have, on average, the lowest external vulnerability.
Emerging Europe remains the region with the highest external vulnerability, followed by Latin America and the Caribbean and the Asia-Pacific region.
But growth in private, rather than public, debt is driving the increase, Moody’s said. Private-sector external debt has grown at an annual rate of 14.3% since 2005 compared with a 5.9% growth rate for public-sector debt.
As financial sectors in African countries grow increasingly more sophisticated, the issuing of domestic debt has risen.