Africa-Press – Mozambique. TANZANIA: THE public debt in Sub-Saharan Africa is expected to decline to 57 per cent this year from 61 per cent of Gross Domestic Product (GDP) last year.
The World Bank’s latest Africa’s Pulse report stated however that the risk of debt distress remains high.
More than half of the African governments grapple with external liquidity problems facing unsustainable debt burdens or are actively seeking to restructure or reprofile their debts.
Public debt service obligations have surged as governments in the region are exposed to market financing and non–Paris Club government loans.
External borrowing is more expensive than it was before the pandemic despite sovereign spreads gradually declining from their peak in May last year.
For instance, the coupon of the new Eurobond issued by Kenya this February is 9.75 per cent, compared to the 6.875 per cent of the Eurobond maturing this year.
According to the report, the pace of economic expansion in the region remains slow and insufficient to have a significant effect on poverty reduction.
The growth per capita in Sub-Saharan Africa is set to accelerate from a modest 0.1 per cent last year to 0.9 per cent this year and 1.3 per cent next year.
However, the projected boost in economic activity remains well below the longterm growth rate. Indeed, the region has remained stuck in a low-growth trap over the past decade: if the region’s growth rate maintained the pace of 2000–14 over 2015–26, real output per capita would be about onethird higher than its level at current growth rates.
Fiscal balances continue to improve, thanks to the fiscal consolidation measures underway in several Sub-Saharan African countries (for instance, Ghana, Kenya, and Nigeria).
Debt restructuring negotiations provide an additional incentive for prudent fiscal management in Ghana and Zambia.
The median fiscal deficit in the region is projected to decline modestly from 3.8 per cent of gross domestic product (GDP) last year to 3.5 per cent of GDP this year.
Although the fiscal balance is expected to improve in most countries in the region (31 of 46), their deficits remain large: the median fiscal deficit of these 31 countries is projected to narrow from 4.8 per cent of GDP last year to 3.8 per cent of GDP this year.
Furthermore, the number of countries with large deficits (exceeding 3 per cent of GDP) has dropped modestly, from a peak of 34 in 2022 to 27 this year.
The vulnerability of African governments’ fiscal positions to global shocks remains a challenge. Transformative policy actions to build fiscal buffers are essential to prevent and/or cope with future shocks.
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