The recently published International Monetary Fund (IMF) Regional Economic Outlook for Sub-Saharan Africa (SSA) titled Navigating Uncertainty has stated that public debt vulnerabilities remain elevated in the region. “The region’s public debt as a ratio to GDP has stabilized at about 55 percent on average across countries. Oil exporters’ debt ratios have fallen by about 10 percentage points of GDP since 2016” the report said. Adjustment in this group of countries occurred through expenditure compression. The reduction in the non-commodity primary fiscal deficit of nearly 14 percentage points of GDP during 2013–18 was achieved largely by cutting public investment and, to a lesser degree, current primary expenditure, while non-commodity revenue fell slightly. Other resource intensive countries they say also made some progress on fiscal consolidation, mainly by reducing recurrent spending. In non-resource-intensive countries, the primary fiscal deficit increased as revenue fell as a ratio to GDP, contributing to higher debt ratios.
Sorry, there are no polls available at the moment.
Despite the stabilization of debt dynamics, public debt vulnerabilities remain elevated in some countries. Among low-income and developing sub-Saharan African countries, seven accounting for 3 percent of regional GDP are in debt distress Eritrea, The Gambia, Mozambique, Republic of Congo, São Tomé and Príncipe, South Sudan, Zimbabwe, and nine accounting for 16 percent of regional GDP are at high risk of debt distress Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Ethiopia, Ghana, Sierra Leone, Zambia. The remaining 19 low-income and developing countries have low to moderate debt vulnerabilities. For middle and upper-income countries, public debt remains sustainable under the baseline in most cases. The IMF report also indicated that there are also vulnerabilities related to the composition of public debt. Public debt stocks are mainly from commercial sources, with more than half from domestic creditors and about 15 percent from Eurobonds. Official bilateral and multilateral debt accounted for only about a quarter of total public debt in 2017, much less than in the early 2000s. The greater reliance on commercial public debt exposes sovereign balance sheets to greater rollover and exchange rate risks. Also, an increase in debt from domestic creditors could crowd out financing for private sector projects. On Weak Balance Sheets, the report highlighted the fact that elevated balance sheet vulnerabilities in many countries limit the room for macroeconomic policies to address downside risks to growth. Several countries have weaknesses in public balance sheets, with high debt ratios and limited repayment capacity, low levels of foreign exchange reserves, and weaknesses in financial and nonfinancial corporate balance sheets. On repairing the banking sector balance sheets, and reducing non-performing loans (NPLs), this IMF says reducing NPLs in banking systems’ would reinvigorate credit and support growth. With varying results, some countries have adopted strategies to clean up banks’ balance sheets, including mandating accelerated write-offs , countries like Comoros, Mauritius, Sierra Leone, Tanzania, transferring defaulted claims to asset management companies also happened in Angola, Guinea-Bissau, Zimbabwe, the clearing of domestic arrears in Eswatini and Gabon, restructuring or resolving failing banks in Côte d’Ivoire, Ghana, Kenya, facilitating foreclosure or out-of-court settlements with debtors (Cameroon), and a combination of such measures (Malawi, Mali, Togo).
By Zainab Iyamide Joaque
Login or Subscribe to read the entire article