The book contains a series of essays initially presented in several virtual workshops held in 2020. MarketForces Africa, a Financial News Media Platform for Strategic Opinions about Economic Policies, Strategy & Corporate Analysis from today's Leading Professionals, Equity Analysts, Research Experts, Industrialists and, Entrepreneurs on the Risk and Opportunities Surrounding Industry Shaping Businesses and Ideas. This involves strengthening national debt management policies to deal with issues of governance. Ethiopia (CCC) and Zambia (RD) are seeking debt restructuring under the G20 Common Framework. PRETORIA, South Africa, May 19 2022 (IPS) - The COVID pandemic has had a profoundly negative impact on Africa's sovereign debt situation. Others at high risk include Malawi, Zambia and Comoros. The UN Food and Agriculture Organization estimated that 33 African countries need external assistance for food, while acute food insecurity is likely to worsen in the next months in 18 of these economies. We believe these factors will make some countries reluctant to seek CF treatment. They pay attention to the impact of the COVID-19 pandemic on the debt situation but also recognise that it is only one factor contributing to the difficult debt situation in the region. Based on 2020 data, the debt to GDP ratio is high for Angola, Cape Verde, Egypt, Gabon, Gambia, Ghana, Kenya, Lesotho, and Libya. On average about 60% of debt owed by sub-Saharan countries is in foreign currencies. In a new report, the Institute of International Finance, IIF, said in the coming years, African countries are faced with about $100 billion Eurobond repayments. Analysts projected that increased borrowing is likely to push more countries under debt distress. However, the CF is targeted towards countries with debt burdens that are challenging from a liquidity or solvency perspective, so the IMFs debt sustainability analysis (DSA) will be an important factor in determining its use. In Egypt, economic activity continued to expand relatively quickly in early 2022, driven by tourism, non-petroleum manufacturing and trade. African countries in high risk of debt distress were listed then as Burundi, Cabo Verde, Cameroon, Central African Republic, Comoros, Djibouti, Ethiopia, The Gambia, Ghana, Guinea Bissau, Kenya, Malawi, Sierra Leone, Zambia, Of the eight countries in debt distress globally, all but Grenada are from Africa. At the end of 2021,the International Monetary Fund (IMF) and World Bank considered 16 low-income African countries to be at high risk of debt distress, the analysis noted. Magalie Masamba receives funding from Danny Bradlow's SARCHI Chair and Oxfam South Africa. In 2020, sub-Saharan Africa had a total external debt stock of US$702.4 billion, compared to US$380.9 billion in 2012. One of such countries, Zambia, defaulted on its Eurobond loan in 2020. IIF however noted that amortization challenges differ markedly within the region, both in terms of the outstanding amount in GDP terms as well as the average remaining maturity of the debt. About one-third of the countries in sub-Saharan Africa are classified as being either in or at high risk of debt distress, including the majority of countries that benefited from debt relief in . Commenting on the debt levels of countries, the newly appointed IMF MD said: "Are we worried about debt levels in Africa, yes because 40% of the countries have gone into debt distress levels . Currently, 22 countries are either in debt distress or at high risk of debt distress. Includes DSAs presented to the Executive Board on lapse of time basis. Sub-Saharan Africa is slipping into a new debt crisis, with 40 per cent of the region's countries now at high risk of debt distress double the proportion of five years ago. Magalie is a co-editor and co-author in this book project funded by the Open Society Initiative for Southern Africa (OSISA). B L Premium. For example, Mozambique and Zimbabwe are already in debt distress. At least 15 more countries which include Cameroon, Ethiopia, Ghana and Kenya are running a high risk of debt distress, according to the report. Debt transparency is the cornerstone of reforming debt management. China, meanwhile, owns the lion's share, which has placed the country at high risk of debt distress. These places have record levels of private as well as public debt, according to the report by the United Nations Conference on Trade and Development (UNCTAD). African countries in high risk of debt distress were listed then as Burundi, Cabo Verde, Cameroon, Central African Republic, Comoros, Djibouti, Ethiopia, The Gambia, Ghana, Guinea Bissau,. New global resurgence in COVID-19 infections heightens the risk of fiscal pressures. For example, Mozambique and Zimbabwe are already in debt distress. This situation is likely to be exacerbated by the war between Russia and Ukraine. The rating would be upgraded to a level reflecting its post-restructuring fundamentals shortly thereafter. Based on 2020 data, the debt to GDP ratio is high for Angola, Cape Verde, Egypt, Gabon, Gambia, Ghana, Kenya, Lesotho, and Libya. Ghana and Tunisia are in talks with the International Monetary Fund (IMF) for emergency loans. The G20/Paris Club official-sector creditors could, for example, make an exception to the requirement of private-sector treatment, or a sovereign might not follow through on a decision to apply for CF treatment. This means that African governments are struggling to pay the debts that they incurred on behalf of. Ethiopia (CCC) and Zambia (RD) are seeking debt restructuring under the G20 Common Framework. However, Ghana (B/Negative) faces a high-interest burden and the recent sharp rise in Eurobond yields complicates refinancing. 07 Nov 2022 12:07:00 It said there are still scenarios under which an intention to seek CF treatment might not entail private-sector restructuring. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together. Tel: +234(80)5207-6440, +234(70)3132-3233 +234(81)1262-6316 African countries, including Nigeria, benefited from the gesture to avert the risk of over bloating debts. Congos financing options remain constrained, as it has fully used its access to financing from the regional central bank, and the regional market remains shallow. However, Ghana (B/Negative) faces a high-interest burden and the recent sharp rise in Eurobond yields complicates refinancing. The COVID pandemic has had a profoundly negative impact on Africa's sovereign debt situation. The Ratings however added that Pakistan with B-/Stable ratings, Mongolia B/Stable and Nigeria B/Stable are also eligible for CF treatment, but the IMF assesses them under a different DSA methodology, which uses less delineated classifications. The average ratio of debt to gross domestic product across Africa is expected to increase from 60% in 2019 to 70%, according to AfDB, and that number could go higher still. This means that African governments are struggling to pay the debts that they incurred on behalf of their states. While liquidity support through the DSSI and emergency These bonds are held by a broad range of investors such as insurance companies, pension funds, hedge funds, investment banks and individuals. It is therefore important for debtors and creditors to enter into contracts that are as comprehensive as possible. We have a bias for economic, business and financial technology news with wide coverage across Africa markets. The number of countries already unable to service their debts has doubled in the past year to eight, and the IMF is urging African countries to raise taxes to provide . The main oil exporters Angola (CCC), the Republic of Congo (CCC), Gabon (B-/Stable) and Nigeria (B/Stable) have already gone through a period of adjustment since 2014-2015 oil price crash and will benefit from higher prices. RT @TheAfricaReport: A recent study conducted by the @FSDAfrica found that the risk of external #debt distress is the most serious risk for African countries at the moment, writes @MarkNapier3 for @theafricareport. The 10 other countries are Benin, Burkina Faso, Cabo Verde, the Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal, and Togo. The report said Ghana, for example, while facing a high debt burden, has not participated in the DSSI, partly out of concerns over market access. The list includes transparency, participation, accountability, reasoned decision-making and effective institutional arrangements. This means that African governments struggle to pay the debts they incurred on behalf their states. This has been reflected in our decision to downgrade Ethiopias rating to CCC, from B with negative outlook this month following its announced intention to seek CF treatment, it added. Nigeria's Private Sector Expands to 2-Year High - PMI The final month of 2021 revealed a robust expansion in Nigeria's private sector with the purchasing manager index (PMI) improving to a 24-month highRead more Six African Countries in Debt Distress, 15 Warming Up In West Africa, growth in Benin (B+/Stable) and Cote dIvoire (BB-/Stable) will remain strong and debt is below the regional median. African countries ramped up foreign currencies debts to meet their separate sovereign fiscal obligation in the face of COVID-19 economic damages in 2020. Apart from the IMF through its Rapid Credit Facility (USD310 million) in 2020, official creditors have not resumed direct budget support loans, halted since the public hidden debt scandal in 2016, although they have provided grants to the country. 19 of the Sub-Saharan Africa region's 35 low-income countries are in debt distress or at high risk of distress, the International Monetary Fund has stated in its October 2022 Regional Outlook Report. This continued a contraction in GDP that had started in 2015, with real GDP now 28% below 2014 levels, according to Fitch recent rating report on the sovereign. For example, Mozambique and Zimbabwe are already in debt distress. Tel: +234(80)5207-6440, +234(70)3132-3233 +234(81)1262-6316 This would include, for example, accommodating who is better able and more willing to accept the risks. Fitch Ratings says in a new report that the outlook for SSA is neutral, as growth is expected in line with earlier trends amid persistent pandemic risks. Six African Countries in Debt Distress, 15 Warming Up In 2021, not less than six African countries including Congo Brazzaville, Mozambique, So Tom and Prncipe, Somalia, Sudan and Zimbabwe are already in debt distress, according to data from the International Monetary Fund. Although, Congo obtained debt service relief under the G20/Paris Club Debt Service Suspension Initiative (DSSI). Addis Ababa, Ethiopia, December 10, 2020 - African countries must be more transparent and accountable when managing sovereign debt amid rising concerns of impending debt distress engulfing the continent. IIF said, following a significant shift in market sentiment in the second half of 2020, Sub-Saharan African (SSA) sovereigns regained access to international bond markets, while Northern African countries had largely preserved their ability to issue. Currently, 22 countries are either in debt distress or at high risk of debt distress. 10 African Countries Face Debts Distress Risk Report. The small tourism-dependent islands Cabo Verde (B-/Stable) and Seychelles (B+/Stable) will benefit from the tourism recovery, despite further delays. Sovereign debtors should follow well publicised, predictable and binding legal procedures in incurring new financial obligations. This will also compensate for less support from International Financial Institutions (IFIs) following large disbursements in 2020. Nigeria's Debts Rise 19tn in 5 Years as FCY Loan Gulps 109bn in Q2 This includes citizens of the debtor states, multilateral creditors, bilateral creditors, and private creditors such as bondholders, institutional investors of various sorts and commercial banks. A private-sector restructuring under the CF is likely to qualify under these criteria, the Ratings agency noted. Rebeca Grynspan UNCTADs Secretary General said: Soaring fertiliser prices owing to the war in Ukraine threaten to reduce food production and deepen the food crisis, with smallholder farmers likely to be worst hit. A new report by the Nigerian Economic Summit Group and the Open Society Initiative for West Africa has disclosed that Nigeria and 10 other Economic Community of West African States countries are currently in debt distress based on debt sustainability analysis. One possible approach is the DOVE (Debts of Vulnerable Economies) Fund. Middle-income countries in Latin America, as well as low-income countries in Africa, will register some of the sharpest slowdowns this year, the report said. MarketForces Africa spotted that these countries are rated mostly CCC by international rating agencies. Leading central banks are raising interest rates sharply, threatening to cut off growth altogether and making sustenance harder for heavily indebted firms, households and governments. For the country, financing options remain limited, according to Fitch Ratings report. At least 15 more countries which include Cameroon, Ethiopia, Ghana and Kenya are running a high risk of debt distress, according to the report. Others at high risk include Malawi, Zambia and Comoros. The outbreak of the pandemic in 2020 exposed African countries fiscal weaknesses and inability to curb exposures to global economic development as sovereigns. EXX Africa assesses the outlook for six major African sovereigns at risk of debt distress, according to the IMF and ratings agency Moody's. Our assessment is sometimes at odds with these institutions' rankings, as some countries are making steady improvements in their debt position whereas others are facing critical debt servicing pressure. Many African countries raised their debt profiles due to the outbreak of covid-19 in 2020 amidst low economic performances. They now owe more money to a broader range of creditors. South Africa, Sudan, Seychelles, Sierra Leone, Rwanda, Sao Tome and Principe, including South Africa and Sudan have heavy claims on their respective economic balance sheet. The intergovernmental organisation laid out a strategy of increased cooperation among developing countries which could . South Africa, Sudan, Seychelles, Sierra Leone, Rwanda, Sao Tome and Principe, including South Africa and Sudan have heavy claims on their respective economic balance sheet. At least 15 more countries which include Cameroon, Ethiopia, Ghana and Kenya are running a high risk of debt distress, according to the report. However, the Ratings held that the common framework, unlike the DSSI, requires debtor countries to seek treatment from private-sector creditors at least as favourable as that agreed with G20/Paris Club official bilateral creditors. Save my name, email, and website in this browser for the next time I comment. For the country, financing options remain limited, according to Fitch Ratings report. Currently, 22 countries are either in debt distress or at high risk of debt distress. The Fund however did not mention the names of the 16 countries. An example is the increasing importance of finance in the global economy. For it to work, Africa's debt restructuring or relief must bring different actors to one same table, chaired by the African . In 2020, sub-Saharan Africa had a total external debt stock of $702.4 billion, compared to $380.9 billion in 2012. Currently, 22 countries are either in debt distress or at high risk of debt distress. For the rest of the year, economic activity is expected to soften owing to the negative spillover of the war in Ukraine, leading to an annual growth forecast of 4 per cent, the analysts noted. This is partly reflected in the growth trajectory of its three largest economies, Nigeria, Egypt and South Africa, which altogether account for roughly 60 per cent of Africas gross domestic product, they added. Thus, they also focus on the broader domestic and international factors that are shaping debt management in the region. Copyright 20102022, The Conversation Media Group Ltd, DOVE (Debts of Vulnerable Economies) Fund, Human Resource Management Open Rank (Tenure-Track), Senior Research Fellow, Environmental Biogeochemistry. It added that favorable liquidity conditions, thus, allow for the rollover of maturing debt and the financing of wider fiscal deficits. According to the Africa Report, only 3 of the countries in Africa with the highest likelihood of sovereign debt distress and default elected to have their debt restructured. It also requires that all necessary issues are addressed. This group has now expanded to include China, India, Turkey and multilateral institutions like the African Export-Import Bank and the New Development Bank.