Sub-Saharan Africa faces a potential debt crunch unless commodity prices improve and boost the pace of economic growth.
The region’s median government debt level will probably exceed 50 percent of gross domestic product this year from 34 percent in 2013, while the cost of servicing the liabilities will average almost 10 percent compared with half that four years ago, the International Monetary Fund
said. There are no investment-grade dollar-debt issuers in sub-Saharan Africa after Moody’s Investors Service and Fitch Ratings Ltd.
cut Namibia to junk this year.
Commodity returns have dropped in six of the past seven years and expectations for slower growth in China
, the biggest consumer, don’t bode well for African nations that depend on mining, crops and oil for the bulk of their income. The region’s growth may average 2.6 percent this year, almost double 2016’s level but barely above population expansion, with delays in making policy changes risking this, the IMF said in October.
“Rising debt levels present a major risk to progress in sub-Saharan Africa, especially if there is another major shock in the global commodity market and if African markets are still in a recovery stage in the economic cycle,” Gaimin Nonyane, London-based economic-research head at Ecobank Transnational Inc., said by email.
Nigerian debt-sale plans will more than double its outstanding U.S.-currency bonds to about $9 billion. That will add to issuances by South Africa, Ghana, Senegal, Ivory Coast and Gabon.
Policy uncertainty in South Africa and Nigeria, the region’s biggest economies, are restraining growth, with the IMF reducing their 2017 expansion forecasts to below 1 percent for the two nations.
In Kenya, the central bank said the nation can’t continue its current debt build-uppath if it’s to remain sustainable. Authorities are also negotiating with the IMF to rollover a standby facility of $1.5 billion.
The number of sub-Saharan African countries in or at risk of debt distress almost doubled to 12 over the past four years, while Mozambique — which defaulted this year — is among those engaging creditors to restructure debt.
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