Medium-term out­look bleak for sub-Sa­ha­ran Africa – Fitch

Weekend Argus (Saturday Edition) - - FRONT PAGE - EMSIE FERREIRA

SOV­ER­EIGN debt lev­els and debt ser­vic­ing costs would con­tinue to rise steadily in sub­Sa­ha­ran Africa in 2016 and 2017, Fitch Rat­ings agency warned yes­ter­day.

It said the me­dian gen­eral government debt-to-GDP ra­tio for the re­gion rose from 30.2 per­cent in 2011 to 49.7 per­cent last year.

“Our coun­try- by- coun­try fis­cal pro­jec­tions im­ply that the me­dian ra­tio will con­tinue ris­ing, to 51.4 per­cent in 2016 and 53.3 per­cent in 2017,” said Jan Friederich, Fitch’s se­nior di­rec­tor for sov­er­eigns.

“The high share of con­ces­sional debt means that in­ter­est costs are not ex­ces­sive for most coun­tries in the re­gion, but their increase makes fis­cal con­sol­i­da­tion more chal­leng­ing.”

Friederich said two key drivers for sub-Sa­ha­ran debt were the com­modi­ties slump that had seen ex­port earn­ings de­cline sharply and con­tin­ued re­liance by cer­tain states on in­fra­struc­ture in­vest­ment to drive up GDP growth.

For ex­am­ple, Ghana planned to use the pro­ceeds of this month’s $ 750 mil­lion Eurobond to re­fi­nance ex­ist­ing debt and fund cap­i­tal in­vest­ments.

And, in Rwanda, Uganda, Le­sotho, Mozam­bique and Ethiopia, cen­tral government capex was set to ex­ceed 10 per­cent of GDP this year.

Friederich said the debt/GDP ra­tio was pro­jected to increase for all Fitch-rated sub-Sa­ha­ran sov­er­eigns other than the Sey­chelles in the pe­riod end­ing 2017.

Mozam­bique was fore­cast to show the big­gest increase at 60 per­cent and Nige­ria the small­est at 3.7 per­cent.

Most sub-Sa­ha­ran na­tions had rel­a­tively low lev­els of debt after ben­e­fit­ing from re­struc­tur­ing and debt for­give­ness in the 2000s. But ris­ing debt has now pushed up me­dian gen­eral government in­ter­est ex­pen­di­ture as a pro­por­tion of rev­enues, from 4.8 per­cent in 2011 to 9.1 per­cent this year.

Fitch pro­jected that it would reach an av­er­age 10 per­cent for the re­gion in 2017.

The agency warned: “Ris­ing debt ser­vic­ing costs are an ob­sta­cle to fis­cal con­sol­i­da­tion among sub- Sa­ha­ran sov­er­eigns, and larger or un­changed deficits will lead to fur­ther in­creases in pub­lic debt, push­ing debt ra­tios higher.

“While debt-funded in­fra­struc­ture in­vest­ment will help re­move con­straints on longterm growth, its ben­e­fits may not fully ma­te­ri­alise un­til gov­er­nance and busi­ness en­vi­ron­ments im­prove.

As such, its near- term im­pact on sov­er­eign debt ra­tios will be neg­a­tive.” – ANA

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