W’Bank: Fiscal Balances Improving on Consolidation Measures in Nigeria, Others

The World Bank has stated that fiscal balances are seeing improvement, largely due to the ongoing fiscal consolidation efforts in Nigeria and other Sub-Saharan African nations.

The bank noted this in its latest Africa’s Pulse report, stressing that fiscal balances are improving but at a moderate pace.

On Nigeria, it stated: “Fiscal balances continue to improve, thanks to the fiscal consolidation measures underway in several Sub-Saharan African countries for instance, Ghana, Kenya, and Nigeria.”

The report indicate a slight decrease in the median fiscal deficit across the region, from 3.8 per cent of gross domestic product (GDP) in 2023 to 3.5 per cent in 2024.

It stated that although most countries in the region, 31 out of 46, are expected to see an improvement in their fiscal balances, “their deficits still persist at significant levels: the median fiscal deficit among these 31 nations is anticipated to narrow from 4.8 per cent of GDP in 2023 to 3.8 per cent in 2024.”

It said: “Debt restructuring negotiations provide an additional incentive for prudent fiscal management in Ghana and Zambia. The median fiscal deficit in the region is projected to decline modestly from 3.8 per cent of gross domestic product GDP in 2023 to 3.5 per cent of GDP in 2024. Although the fiscal balance is expected to improve in most countries in the region (31 of 46), their deficits still remain large: the median fiscal deficit of these 31 countries is projected to narrow from 4.8 per cent of GDP in 2023 to 3.8 per cent of GDP in 2024.

“Furthermore, the number of countries with large deficits exceeding 3 per cent of GDP has dropped modestly, from a peak of 34 in 2022 to 27 in 2024. The vulnerability of African governments’ fiscal positions to global shocks remains a challenge. Transformative policy actions to build fiscal buffers are essential to prevent and/or cope with future shocks.”

For the region, the World Bank said growing debt service obligations are creating liquidity problems and crowding out development spending.

“Public debt in Sub-Saharan Africa is expected to decline from 61 per cent of GDP in 2023 to 57 per cent of GDP in 2024. However, the risk of debt distress remains high. More than half of the African governments grapple with external liquidity problems, face unsustainable debt burdens, or are actively seeking to restructure or reprofile their debts.

“Public debt service obligations have surged as governments in the region are exposed to market financing and non–Paris Club government loans. External borrowing is more expensive than it was prior to the pandemic despite sovereign spreads gradually declining from their peak in May 2023. For instance, the coupon of the new Eurobond issued by Kenya this February is 9.75 per cent, compared to the 6.875 per cent of the Eurobond maturing in 2024,” the World Bank said.