Magazine article African Business

Has Africa Learned Its Lesson on Debt? Global Interest Rates Are Still Hovering Round Historic Lows, but a Sharp Rise Could Have Ugly Consequences for Africa's Economies

Magazine article African Business

Has Africa Learned Its Lesson on Debt? Global Interest Rates Are Still Hovering Round Historic Lows, but a Sharp Rise Could Have Ugly Consequences for Africa's Economies

Article excerpt

Thirteen years after the debt relief movement saw billions in unsustainable public borrowing written off by Western creditors, there are worrying signs that African economies could be lurching towards another crisis.

Average public debt is expected to rise to 53% of GDP this year, up from 34% in 2013. The average cost of debt servicing is 12.2%, the highest since 2001, and as high as 35.4% of government revenue in Ghana.

Driven by the collapse in commodity prices and growing deficits countries have flocked back to international lenders like the IMF. More than 20 countries have taken out loans since 2012. Within the last month Egypt, Ghana, Nigeria, Kenya and Cote d'Ivoire--all key economies--have all either issued large eurobonds or announced intentions to do so.

Nigeria has just sold $2.5bn of eurobonds, adding to a record $4.8bn last year. Egypt has raised $4bn this year to help plug a budget deficit, on top of its $i2bn IMF loan taken out in late 2016. Ghana and Cote d'Ivoire are mulling $1bn eurobonds, while Kenya has just raised $2bn.

Unsustainable levels

All of this comes despite growing warnings about unsustainable debt levels on the continent.

Zambia has just received a warning from the IMF that it is at high risk of debt distress. Africa's second-largest copper producer has been seeking a bailout from the Washington, DC-based lender since late 2016. In a bid to secure a loan Lusaka recently agreed to to restructure its debt with China.

Meanwhile Kenya has also been in trouble with the IMF, with access to a $1. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.