Debt and Interest can cripple individuals, families, and businesses. Even entire countries have been devastated in some way shape or form through systems of heavy debt and interest. There are many examples of African countries that have been impacted by high levels of debt and interest in recent decades.
One example is Ghana, which experienced a severe debt crisis in the 1980s. The country had accumulated a large amount of debt in the 1970s, and by the early 1980s, the country was unable to meet its debt obligations. Ghana was forced to implement austerity measures, which led to a decline in living standards for many of its citizens.
Another example is Mozambique, which in 2016, it was revealed that the country had taken out a series of undisclosed loans for a total of about $2 billion. This debt had been guaranteed by the government without parliamentary approval, and the high-interest loans were used to finance questionable maritime and tuna fishing projects. This led to a debt crisis and a decrease in state spending on social services, economic contraction, devaluation and a hit on the living standards of the population.
Another African country that has been severely impacted by debt and interest is Ethiopia, which has been facing a severe foreign currency crunch and a public debt burden. The country has been hit hard by the economic fallout of the COVID-19 pandemic, which has exacerbated its debt problems.
In general, many African countries are facing debt sustainability issues, and have been struggling to meet the interest payments on their debt. It is likely that this debt, in a rising interest rate environment, will cause further economic, fiscal, and even societal issues as these economies struggle to repay the debt under heavier levels of interest.