Sub-Saharan Africa’s 2020 public debt to go up to 65% of GDP: IMF

  • Projection goes up from pre-COVID-19 projection of 56.4%
  • Largest increases expected in oil-exporting countries
  • Govt revenue in 2020 is expected to fall by about 2.3 percentage points

Harare- Sub-Saharan Africa’s public debt is projected to increase to 65% of GDP by the end of 2020 following the relaxation of fiscal stances in response to the COVID-19 pandemic.

A report by the International Monetary Fund (IMF) states that the pandemic is driving a resumption of rapid debt increases in the region as the public debt is expected to rise from a pre-COVID-19 projection of 56.4% with the largest increases being expected in oil-exporting countries.

The institution said after the Heavily Indebted Poor Countries and Multilateral Debt Relief initiatives, public debt declined significantly in sub-Saharan African countries until the end of the 2000s and countries in the region took advantage of the fiscal space generated by these initiatives.

“…public debt rose from about 35 percent of GDP in the early 2010s to about 55 percent of GDP in the mid-2010s”.

Debt broadly stabilised thereafter and was expected to start declining in 2020 as several countries were embarking on fiscal consolidation but the COVID-19 pandemic hit and as a result, countries needed to respond by relaxing their fiscal stance.

IMF added that the capacity of countries in the region to support their debt burdens in increasingly strained.

Furthermore, because of weaker economic activity and governments’ support to the private sector in the COVID-19 context, government revenue in 2020 is expected to fall below pre-COVID-19 projections by about 2.3 percentage points of GDP.

“The combined effects of this revenue shortfall and the higher debt service are pushing up the debt-service-to-revenue ratio from about 22 percent under pre-COVID-19 projections to about 27 percent under current projections”, IMF said.

Meanwhile, the IMF said its estimates suggest that the sub-Saharan Africa faces a funding shortfall from 2020-23 with external needs of about $890 billion.

In a bid to help cover a portion of the region’s needs and to catalyze additional support from the international community, its Rapid Credit Facility and the Rapid Financing Instrument under which it has extended loans has increased access in the context of existing arrangements and granted debt service relief for its most vulnerable members through the Catastrophe Containment and Relief Trust (CCRT) will be extended to 2021.  

As of the end of September 2020, the IMF has provided about $16 billion in support to the sub-Saharan region for emergency assistance and CCRT debt service relief over the course of the previous six months.

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