THE IMF has issued a cautionary statement regarding sub-Saharan Africa’s debt situation, underscoring ongoing challenges despite a decline in debt levels following a series of sovereign defaults. While debt-to-GDP ratios are projected to decrease, the region continues to face hurdles in accessing affordable financing, prompting spending cuts and jeopardising growth prospects.
According to the IMF’s biannual Regional Economic Outlook report, sub-Saharan Africa’s public debt-to-GDP ratio peaked at 60.1 percent last year and is forecasted to decrease to 58.5 percent in 2024 and 56.8 percent in 2025. Despite this decrease, accessing new financing remains arduous and costly for many countries in the region.
‘The return to market is really very important – we call it a pricey recovery because we don’t want to give the impression that the funding squeeze is over,’ remarked Abebe Selassie, Director of the IMF’s African Department. ‘The access that has been gained comes at a price.’
While countries like Cote d’Ivoire, Benin, and Kenya have returned to international capital markets this year with eurobond issuances, the IMF notes that the borrowing comes at significantly higher interest rates, reflecting the persistent challenges in accessing affordable financing.
The region’s economic woes have been exacerbated by external shocks, including Russia’s invasion of Ukraine, which has led to a surge in food, fertiliser, and fuel prices, along with rising global interest rates. These factors, coupled with the aftermath of the Covid-19 pandemic, have further strained Sub-Saharan Africa’s already fragile economies.
Despite efforts to address debt through mechanisms like the Common Framework, progress has been slow, with countries like Zambia, Ghana, and Ethiopia undergoing debt restructurings. However, challenges persist, with some nations completing the process without receiving substantial debt relief.
The current funding squeeze in sub-Saharan Africa is further compounded by a reduction in aid over the past 15 years, coupled with aid redirection to other regions and a decline in lending from key partners like China.
As sub-Saharan Africa navigates these economic challenges, the IMF underscores the urgent need for sustained efforts to address debt sustainability, promote inclusive growth, and enhance financial resilience across the region.
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