“IMF Forecasts Decline in Sub-Saharan Africa Debt Levels Amid Funding Challenges”

Date:

Johannesburg/Washington, April 19 (Reuters) – According to the International Monetary Fund (IMF), debt levels in Sub-Saharan Africa are expected to decrease following a series of sovereign defaults, but securing new financing remains challenging and costly, leading to spending cuts and jeopardizing growth prospects.

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In its biannual Regional Economic Outlook report released during the Spring Meetings in Washington this week, the IMF highlighted that the region’s public debt-to-GDP ratio peaked at 60.1% last year and is projected to decline to 58.5% in 2024 and further to 56.8% in 2025.

The report noted that Ivory Coast, Benin, and Kenya returned to international capital markets this year with eurobond issuances after a two-year absence, albeit at significantly higher interest rates.

Abebe Selassie, Director of the IMF’s African Department, emphasized the importance of accessing markets but referred to it as a “pricey recovery,” indicating that funding remains constrained and costly.

Following defaults by Zambia, Ghana, and Ethiopia since 2020, the region has experienced a decline in external debt servicing and reduced inflows from abroad, resulting in the lowest net foreign flows into Sub-Saharan Africa since the global financial crisis of 2008-2009.

The IMF report highlighted looming debt repayments this year and next, coupled with financing challenges, leading countries to cut essential public spending and redirect development funds toward debt service, thereby posing risks to future growth prospects.

Sub-Saharan Africa has faced significant economic challenges since 2020, compounded by external shocks such as the Russia-Ukraine conflict, which has driven up food, fertilizer, and fuel prices, along with rising global interest rates making new debt issuance increasingly expensive post-COVID-19.

Countries like Zambia, Ghana, and Ethiopia are undergoing debt restructurings under the Common Framework, designed to involve newer creditor nations like China and India. Progress has been slow, with Chad completing its Common Framework process without receiving debt relief.

The IMF attributed the current funding squeeze in Sub-Saharan Africa to reduced aid over the past 15 years, aid redirection to other regions like Ukraine and Gaza, and a decline in lending from China.


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