Sub-Saharan Africa’s debt pressures will continue to rise

By Rachel Savage

JOHANNESBURG (Reuters, Dec 14) – As global interest rates rise, the external debt service burden for Sub-Saharan Africa’s sub-Saharan Africa will increase in the future, Fitch, a ratings agency, said Wednesday.

Fitch rates Sub-Saharan African nations rated as “External Debt Servicing” at $22.3 billion in 2023. This is up from the $21.4 billion it rated in 2022.

An increasing number of emerging markets are experiencing mounting debt due to rising inflation and high borrowing costs. They have been left without access to international capital markets.

Very few Sub-Saharan African government have large international bond payments next year.

Nigeria will receive a payment of $500 million in July. Rwanda will have to pay $61million on a May bond. Gabon and Ivory Coast also face December payments of $37 and $56 millions, respectively.

However, the amounts increase significantly each year.

According to the World Bank, total debt service due by 2024 will rise approximately 12% to $25 Billion.

Fitch has downgraded Kenya on Wednesday and now faces a $2Billion payment in June. Ethiopia is due $1 billion in December payments. Gabon, Ivory Coast, and Benin will each be paying $196 million to $17 million and $63 millions respectively.

After becoming the first African sovereign default under the COVID-19 era, in 2020, Zambia is currently in debt restructuring. Ghana announced last week that it would restructure its debts to help it deal with the worst economic crisis it has faced in a generation.

The West African country signed a loan agreement with the International Monetary Fund for $3 billion, but it is facing resistance from its citizens to its local bond overhaul.

Fitch reported that “the risk of debt service obligations catalyzing external liquidity stress into severe economic instability or default, such as in Sri Lanka, 2022,” Fitch said.

Fitch said that Angola, Republic of Congo and Ethiopia have debt payments due 2023. These amounts are more than a quarter of their last reported foreign currency reserves.

(Reporting by Rachel Savage, editing by Marc Jones, Alexandra Hudson).