What You Need to Know
Citi’s Chief Africa Economist, David Cowan, forecasts that Senegal, Mozambique, and Malawi may default on their debts within the next two years. The predictions stem from the financial strain caused by the Iran oil price shock and ongoing economic challenges. Cowan highlighted that while Africa has faced several defaults since 2020, the situation remains precarious for these nations, particularly,
Africa-Press – Mozambique. Senegal, Mozambique and Malawi could default on their debts in the next two years, Citi’s Chief Africa Economist David Cowan said on Thursday, as governments reel from the impact of the Iran oil price shock on their finances and economies.
Since 2020, the 54-nation continent has experienced four sovereign defaults that were restructuring debt under the G20 initiative – Ghana, Zambia, Ethiopia and Chad – with countries buckling under a mix of heavy debt burdens and economic mismanagement exacerbated by external shocks from the COVID-19 pandemic to Russia’s full-scale invasion of Ukraine.
“Africa is still not entirely out of the woods yet in terms of the debt defaults,” David Cowan told a news briefing.
Senegal, which has been seeking to steer its way out of a hidden debt crisis uncovered in late 2024, was still in “a pretty big mess,” he said, meaning they could head into a default in 2027 after scraping through this year.
Malawi and Mozambique could default this year, Cowan said, citing a steep weakening of their respective currencies, which could push their debt stocks and payments due on hard-currency lending into unsustainable territory.
Defaults by the two Southern African nations could however be resolved quickly since Malawi does not have international bonds, while Mozambique has only one outstanding hard-currency bond.
“Malawi’s debt is largely owed to the World Bank, multilateral and bilateral donors,” he said.
Overall, Africa is faring better in terms of international borrowing costs in the Iran war-linked crisis compared with previous ones, Cowan said, citing the Democratic Republic of the Congo’s debut Eurobond issuance.
Kenya could let its currency weaken to absorb some of the depreciation pressure stemming from elevated prices of crude oil, Cowan said.
Since 2020, Africa has seen multiple sovereign defaults, including Ghana, Zambia, Ethiopia, and Chad, primarily due to heavy debt burdens and economic mismanagement. The COVID-19 pandemic and geopolitical tensions, such as the Ukraine conflict, have further exacerbated these issues, leading to increased financial instability across the continent. As countries like Senegal, Mozambique, and Malawi grapple with these challenges, the outlook for their economies remains uncertain, with potential defaults looming on the horizon.
