By Lord Fiifi Quayle

Every time an African sovereign enters debt distress, the world’s financial institutions mobilise with impressive precision. Ratios are calculated. Stress tests are run. Creditor committees form. Restructuring timelines are debated with extraordinary granularity.

At the centre of it all sits the Debt Sustainability Analysis, the IMF and World Bank’s primary tool for determining whether a country’s debt burden is manageable.

There is just one problem: it is answering a creditor’s question, not a development one.
The standard DSA framework measures debt-to-GDP, interest-to-revenue, and gross financing needs. It stress-tests liabilities under adverse scenarios, commodity price shocks, exchange rate depreciations, growth shortfalls.

What it does not measure, in any systematic way, is what the debt actually financed. Whether borrowed capital was converted into productive assets. Whether the spending raised output, expanded the tax base, or built resilience against the next shock.

In the language of accounting, the DSA is a liability-side instrument applied to a balance sheet problem. The asset side — the developmental return on borrowed public capital — is treated as a background assumption, not a measurable variable.
This is not a technical oversight. It is a structural bias, and African sovereigns pay for it in every debt negotiation they enter.
Consider Nigeria. Its 2024 budget reveals the gap in stark terms: recurrent expenditure consumed 72 percent of total spending, while capital expenditure accounted for just 22 percent. Debt service alone absorbed 69 percent of revenue.

Under standard DSA logic, this is a liquidity and solvency problem modelled, measured, and managed through fiscal adjustment targets. But there is another way to read those numbers.

A government spending the overwhelming majority of its borrowed funds on wages, subsidies, and debt service is not building the productive capacity that would make future debt sustainable.

The framework that is supposed to prevent debt crises is, in this case, blind to the mechanism generating them.
Ghana offers a different lesson. It has made genuine progress under its IMF programme, domestic debt restructured, fiscal consolidation underway, sovereign outlook recently upgraded to positive by Moody’s. And yet growth remains weak, private sector credit is constrained, and confidence recovers slowly.

Restructuring improved the liability side of the balance sheet. Whether it rebuilt the asset side the infrastructure, the human capital, the productive investment that generates durable solvency remains largely unmeasured and therefore largely unaccountable.
The shift to domestic borrowing makes this argument more urgent, not less.

African governments now raise more than half of their financing domestically, at nominal yields averaging 10 to 13 percent, compared to below one percent for concessional multilateral loans. Analysts have rightly noted this reduces foreign exchange mismatch.

What is said less often is that it replaces one form of vulnerability with another. Domestic borrowing at those rates is defensible only if it finances assets that generate returns sufficient to service the debt. Without a systematic way to track that conversion, the shift to domestic markets may simply be exchanging currency risk for deployment risk and doing so invisibly.

The deployment gap is not unmeasurable. It is unmeasured because the current architecture demands precision on liabilities and accepts vagueness on assets.

Creditors require detailed amortisation schedules and covenant compliance. No comparable standard requires governments or creditors to report what share of new borrowing finances capital formation versus recurrent spending, or what fiscal return that investment generates over time.

The fix does not require dismantling the DSA. It requires augmenting it.

A single additional metric the share of public borrowing allocated to capital formation, tracked consistently and incorporated into debt sustainability assessments would shift the conversation in a fundamental way.

It would force creditors to consider not just whether a sovereign can repay, but whether the conditions for repayment are being built. It would give African governments a framework to argue for investment headroom in programme negotiations, rather than accepting blanket fiscal consolidation targets that cut capital budgets first because they are politically easier to cut.

More importantly, it would make visible a dynamic that the current architecture renders invisible: that debt distress in many African countries is not simply the result of borrowing too much, but of borrowing without adequate accountability for what that borrowing was supposed to create.

The world has built a precision instrument for measuring Africa’s debts. It has built almost nothing for measuring what those debts were supposed to deliver.

African analysts, policymakers, and finance ministers have spent years arguing about the terms of restructuring. The harder, more important argument about what restructured debt will actually finance has barely begun.

That conversation should not wait for the next crisis. It should start now, at the balance sheet, on the side that has been blank for too long.

GHANA MUST WORK AGAIN

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The author is a sovereign risk analyst specialising in African debt markets. Author of Pricing Uncertainty: Black-Scholes Risk and the Future of African Finance