Resur­gent Debt Costs in sub-Sa­ha­ran Africa…

Zambian Business Times - - FRONT PAGE -

Sub-Sa­ha­ran Africa's (SSA) debt bur­den is back to pre-HIPC lev­els. In fact, it has been in­creas­ing since 2011. Does this mean that the World Bank's aim to en­sure that the world's poor­est coun­tries were not bur­dened by un­man­age­able or un­sus­tain­able debt—has fal­tered?

Ar­guably, yes, says S&P Global Rat­ings in a re­port pub­lished to­day ti­tled "Resur­gent Debt-Re­pay­ment Risks in Sub-Sa­ha­ran Africa Sug­gest The HIPC Ini­tia­tive Has Fal­tered", avail­able on Rat­ings Di­rect. While most SSA gov­ern­ments' ac­tual debt stocks as a per­cent­age of GDP are still only around half of pre-HIPC lev­els on av­er­age, they are fork­ing out the same amount as be­fore HIPC in terms of in­ter­est ex­pen­di­tures as a per­cent­age of gov­ern­ment rev­enues.

Given these high in­ter­est bur­dens, as well as the new types of debt the re­gion is tak­ing on, debt ser­vic­ing and re­pay­ment risks have re-emerged.

We fore­cast SSA debt stocks and in­ter­est pay­ments will re­main quite high but will sta­bi­lize as a per­cent­age of GDP and rev­enues in 2018-2021; we fore­cast av­er­age net gen­eral gov­ern­ment debt to GDP to re­main around 50% across the re­gion while in­ter­est pay­ments will av­er­age around 10.5% of gen­eral gov­ern­ment rev­enues.

This mainly re­flects our ex­pec­ta­tion of slightly stronger eco­nomic growth, partly sup­ported by some­what more fa­vor­able com­mod­ity prices and eas­ing drought con­di­tions.

How­ever, given the al­ready high debt met­rics, ex­po­sure to ad­verse ex­change rate ef­fects on for­eign-cur­rency debt and tight­en­ing of fi­nanc­ing con­di­tions as U.S. mon­e­tary pol­icy con­tin­ues to nor­mal­ize could ren­der some coun­tries vul­ner­a­ble, and risks will re­main sig­nif­i­cant. Mozam­bique and Congo-Braz­zav­ille have al­ready de­faulted on their com­mer­cial debt, in 2016 and 2017. Only a rat­ing com­mit­tee may de­ter­mine a rat­ing ac­tion and this re­port does not con­sti­tute a rat­ing ac­tion.

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