AfDB ‘dissatisfied’ with slow progress in debt restructuring across Ghana, Zambia and Ethiopia
The African Development Bank (AfDB) has expressed reservations about the sluggish pace of debt restructuring and fiscal consolidation in key African economies, notably singling out Zambia, Ghana, and Ethiopia.
Despite a moderate reduction in public debt, which still exceeds pre-Covid-19 levels, the AfDB underscores persistent vulnerabilities across the region.
While fiscal consolidation measures have contributed to stabilizing public debt, with the debt-to-GDP ratio averaging around 63.5% during 2021–23 and a projected settlement at approximately 60% from 2024 onward, challenges still persist.
Escalating interest rates on commercial debt and the impact of exchange rate depreciations, the AfDB says continue to amplify debt vulnerabilities, even with the anticipated decline.
The AfDB further notes a substantial increase in the share of external commercial debt over the past two decades, constituting 43% of total external debt in 2021, up from 20% in 2000.
In a glimmer of hope, the AfDB highlights progress in debt restructuring, citing Zambia’s agreement with official bilateral creditors, led by China, to restructure $6.3 billion of external debt. This development provides a sense of optimism for Ethiopia and Ghana, both seeking debt moratoriums from the Group of 20.
The AfDB underscores the potential of debt relief initiatives to create fiscal headroom for growth, particularly if extended to all countries grappling with debt distress or at high risk. Such measures could complement domestic fiscal consolidation efforts, offering a pathway to recovery from prevailing economic shocks.
