Addressing African debt burdens
In the first two months of 2020, before COVID-19 struck the global economy, emerging markets experts warned of a growing “wall” of sovereign debt repayments threatening many African nations. Obligations to official ( i.e., national) creditors comprised a large share of the burden, but of equal concern was the growth of indebtedness to private (i.e., individual) creditors, fueled by recent years’ increases in foreign bond issuance.
By the start of 2021, concern has become crisis. Across the world, COVID-19 has ravaged economies and government revenues. For many sub-Saharan African (SSA) nations, that has tipped the delicate balance of debt. Zambia was the first affected, defaulting on debt obligations in November. Many more must take action to avoid the same fate, including Angola, Gabon, Ghana
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Various international bodies have indicated that sub-Saharan Africa is the region with the fastest growing debt burden in the world, with the pace of increase raising concerns about debt sustainability on the continent.
According to SA Reserve Bank governor Lesetja Kganyago the magnitude, pace and spread of the build-up in debt obligations have raised macroeconomics and financial stability concerns, especially in emerging and developing countries.
Kganyago said: “Debt levels have been increasing considerably during 2020 with the interplay between various factors, most notable the need to manage the impact of the Covid-19 coronavirus pandemic.”
Speaking at the virtual 4th annual Distributed Sovereign Debt Research and Management conference, Kganyago said while debt has a very important role to play in economic development, one should also reflect on the challenges and pitfalls presented by debt to developing countries in sub-Saharan Africa.