Public debt ratios across Africa rise to 20-year high over Russia’s war on Ukraine, other factors
In the latest edition of its Sub-Saharan Africa Regional Economic Outlook which was released earlier this week, the International Monetary Fund (IMF) disclosed that the ongoing war in Ukraine has exacerbated Africa’s debt crisis, pushing the public debt ratios across the continent to a 20-year high.
The report, a copy of which was obtained by Business Insider Africa, also noted that other factors such as the economic fallouts of the pandemic have contributed to the debt crisis.
“Sub-Saharan Africa’s public debt has increased steadily for more than a decade. This has helped fund the region’s development needs but is now placing severe strains on debt sustainability in many countries. Moreover, the pandemic has worsened most countries’ fiscal position, pushing public debt to its highest level since the beginning of the century. One-half of low-income countries in the region are in debt distress or at high risk of distress, and many have been left with little or no fiscal space at a time of elevated spending needs”.
It’s important to note that many African countries’ debt challenges precede the Ukraine war. Earlier this year, the World Bank raised the alarm that debt in many low-income countries (many of which are in Africa) has risen to unprecedented highs.
Also, Standard Bank Group recently red-flagged Ghana, Kenya, Angola, Ethiopia and Zambia, calling them the ‘fragile five’ and warning that they could soon face serious debt risks.
Meanwhile, the IMF said many other African countries (at least 14 of them) are also at high risk of debt distress. This is based on an assessment of 45 countries across the continent.
Read: Positive outlook for mass grocery retail in Ghana as household spending increases
Unfortunately, debt renegotiations are proving difficult, seeing as many African countries have shifted their bilateral debt agreements away from Paris-Club lenders to the likes of China.
Moving on, the IMF report also detailed the other ways the ongoing war in Ukraine is affecting African countries. For one, the prices of essentially every commodity/consumable have gone up due to disruptions in food and energy supplies from both Ukraine and Russia.
The IMF observed that the impacts of the Ukrainian conflict is hitting Africa hard at a time when many “countries have little to nonexistent fiscal space to buffer the shock.”
To this end, they recommended that the fiscal response by the government needs to be targeted at protecting vulnerable people from the harsh economic realities brought about by soaring food and energy prices. And this must be done in such a way that it does not complicate the region’s “debt vulnerabilities”.
