Africa is poised to grapple with elevated public debt levels extending beyond pre-pandemic thresholds into 2024 and 2025, according to a United Nations official speaking at a United Nations Commission for Africa (UNECA) conference in Victoria Falls.
The Dire State of Africa’s Debt
Adam Elhiraika, the director of macroeconomics and governance at UNECA, highlighted that despite concerted efforts, Africa faces persistent debt burdens, with several countries still at risk of slipping into debt distress. Elhiraika noted that eight nations are currently in debt distress, while an additional 13 are teetering on the brink of financial instability.
Economic Shocks and Fiscal Challenges
The continent has endured successive economic shocks since 2020, including the COVID-19 pandemic, geopolitical tensions like Russia’s invasion of Ukraine, and the escalation of U.S. interest rates. These challenges have left governments grappling with strained finances and mounting debt obligations.
Alarming Debt-to-GDP Ratio
Elhiraika emphasized the alarming trajectory of Africa’s debt-to-GDP ratio, which stood at 62.5% by the end of 2022. According to a recent report from the International Monetary Fund (IMF), this ratio had doubled to 57% over the decade leading up to 2020 and could further escalate by 10 percentage points over the next five years without a significant shift in fiscal policies.
Collaborative Efforts Needed
“There is a pressing need for African countries to collaborate with international partners to address the looming debt distress,” Elhiraika stressed.
Fiscal Strain and Government Measures
Highlighting the fiscal strain faced by many African nations, Elhiraika pointed out that Africa’s fiscal deficit swelled to 4.6% of GDP last year and is projected to widen further to 5% in 2024. Consequently, governments across the continent are compelled to curtail spending, while interest payments continue to escalate.
Calls for Financial System Overhaul
Zimbabwe’s Finance Minister, Mthuli Ncube, echoed the call for a global financial system overhaul, advocating for enhanced accessibility and affordability of finance for African nations.
Addressing Debt Vulnerabilities
Against the backdrop of Zambia and Ghana defaulting on their debt in recent years, and Ethiopia joining the ranks in December 2023, the urgency to address Africa’s debt vulnerabilities has become increasingly evident.
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Credit: Nyasha Chingono