African countries

IMF: 20 sub-Saharan African countries in over-indebtedness, at high risk of over-indebtedness

• Nigeria not on list despite huge public debt burden

Francois Ndubuisi

The International Monetary Fund (IMF) has warned that debt vulnerabilities remain high in sub-Saharan Africa, with as many as 20 countries in the region either at high risk of debt distress or already in debt distress.

The head of the regional studies division of the IMF’s African department, Papa N’Diaye, who revealed in a new podcast published by the multilateral lender, said that the debt burden in the region was very heavy at a when the social and development needs are very great.

Unsustainable debt could lead to debt overhang, when a country is unable to meet its financial obligations and resorts to debt restructuring.

Although the IMF chief did not list the 20 African countries in debt distress or at high risk of debt distress, the most recently released data indicated that eight countries globally were in debt distress, 30 at high risk, 24 at moderate risk. and seven countries at low risk of debt distress.

African countries at high risk of debt distress were then listed as Burundi, Cabo Verde, Cameroon, Central African Republic, Comoros, Djibouti, Ethiopia, Gambia, Ghana, Guinea Bissau, Kenya, Malawi , Sierra Leone, Zambia,

Of the eight over-indebted countries in the world, all except Grenada are African. They include Chad, Republic of Congo, Mozambique, Somalia, South Sudan, Sudan and Zimbabwe.

The IMF official said the debt service to income ratio had increased, adding that the debt burden is very heavy at a time when social and development needs are very great.

Despite its public debt profile of N39,556 billion ($95.77 billion) as of December 31, 2021 and a debt service-to-revenue ratio of over 80%, Nigeria is neither classified as an over-indebted country. nor at high risk of over-indebtedness.

N’Diaye said: “Thus, for the countries of the region, the space to deal with the impact of the war in Ukraine is very limited, and it will be necessary to make difficult choices. Firstly, for us, the priority is really for countries to help the most vulnerable populations mainly through targeted transfers, if possible, in particular countries that have good social safety nets.

“Those without these safety nets could resort to food subsidies and tax cuts. But these will certainly have to be contained both in scope and time, given the limited fiscal space available to countries.

He stressed that Sub-Saharan African countries should try to create more space by improving domestic revenue mobilization, as well as ensuring they get value for money by increasing the efficiency of public spending.

According to him, “Sub-Saharan African economies were growing very strongly in 2021. We expected the region’s average growth to be around 3.7% for 2021. It turned out to be 4. 5%. And most of that positive surprise, or that momentum, started in the second half.

“But what the war in Ukraine has done is put a stop to that momentum. This led to a significant increase in commodity prices, greater volatility in global financial markets.

He said inflationary pressures had risen a lot, adding: “We are now seeing double-digit inflation for the region as a whole, higher I think at 11.5% by 2021. We expect that, if you look at the average for the period, to go towards 12.25 percentage points.

“And this is the first time since 2009 that we have this double-digit projection for inflation. And that mainly reflects higher food prices and higher energy prices.

“And as you can imagine, this will have a big impact on the region’s most vulnerable, increase poverty and could potentially increase social tensions. So for the policy makers in the region, like the central bankers in particular, dealing with this inflation and these pressures is not going to be easy because of…also the impact that the policies might have on growth.