Resurgent Debt Costs in sub-Saharan Africa…

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.