The World Bank, in its latest Africa Pulse report, has revealed that the continent’s public debt is expected to drop from 61 percent of GDP in 2023 to 57 percent in 2024.
However, the report indicated that Sub-Saharan Africa’s public debt rather tripled in 2019 owing to increased local and external debt levels.
Between 2012 and 2019, Sub-Saharan Africa saw its median public debt-to-GDP ratio climb from 29% to 53%, excluding the impact of the COVID-19 pandemic. Projections indicated that this ratio would increase to 61% by 2023.
“Sub-Saharan Africa’s debt service levels have steadily increased since 2012, adversely affecting fiscal space and increasing vulnerability to shocks, especially for countries that have gained access to the international bond market and other non-concessional financing sources. Total debt service increased by US$46.6 billion between 2012 and 2022,” the global lender noted in the report.
“Public debt in Sub-Saharan Africa is expected to decline from 61 percent of GDP in 2023 to 57 percent of GDP in 2024. However, the risk of debt distress remains high,” the report reads, despite the ongoing high debt risk on the continent.
Moreover, the report emphasised the region’s limited access to external funds, which is crumpling its ability to finance its development.
“During the past decade, public debt increased rapidly, and the composition of public and publicly guaranteed (PPG) external debt shifted from bilateral creditors to private creditors and non-Paris Club governments.
“Consequently, the larger share of debt owed to private creditors and non-Paris Club governments has not only complicated debt restructuring negotiations, but also raised
the debt service burden. High policy rates in advanced economies have recently further increased interest payments on debts,” it noted.
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According to the World Bank, over half of African countries face financial challenges, struggle with unsustainable debt levels, or seek debt restructuring.
The continent’s governments heavily depend on market financing and non-Paris Club loans, leading to a significant rise in public debt servicing.
“External debt restructuring is still in progress under the Common Framework in Ethiopia, Ghana, and Zambia. The presence of multiple creditors—particularly private creditors and non-Paris Club governments—makes debt restructuring negotiations
complex.
“For instance, Chad and Ghana have relatively lower exposure to loans from China. The share of PPG external debt owed to China accounted for 7 percent in Ghana and 11 percent in Chad in 2022,” the report added.
The post Africa’s public debt to decline from 61% of GDP to 57% in 2024 – World Bank report first appeared on 3News.
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