Ghana's President John Dramani Mahama, whose country is among seven that
faced the risk of elevated debt levels at the end of 2015. AFP PHOTO |
DON EMMERT
PARIS, FRANCE
The spectre of
high debt is raising its head again in Africa, analysts say, as
sub-Saharan nations that borrowed cheaply on global markets are now
squeezed by a commodities crash.
The return of debt
troubles in Africa has caught some by surprise, they say, 20 years after
a global campaign was mounted to offer debt relief to the world's most
impoverished nations.
"It is clearly a source of
concern. People did not see it coming," said Julien Marcilly, chief
economist at French group Coface, which offers worldwide insurance to
protect firms from the risk of clients defaulting.
An
IMF-World Bank programme launched in 1996 has to date approved $76
billion (68 billion euros) in external debt relief for 36 of the world's
heavily indebted poor nations, of which 30 are in Africa.
For some of those countries, however, debt levels are rising again to worrying levels.
Relieved
of their debt burdens by the international programme, countries enjoyed
the budgetary freedom to boost economic growth, which was further
propelled by soaring commodity prices.
"Over the past
few years, sub-Saharan African sovereigns have enjoyed unusually
favourable financing conditions," Standard & Poor's said in a
recent report.
Many of them issued bonds for the first
time to raise money on financial markets as borrowing costs slumped to
record lows in mid-2014, the New York-based credit rating agency said.
"The
tide has turned," it warned, however, predicting that most of these
countries would have to spend more and more over the next three years to
service their debt.
Many of those sub-Saharan
countries will face a difficult choice between cutting spending or being
obliged to pay higher debt and interest payments in the future,
Standard & Poor's said.
And this time, a large part of the debt is held by private creditors, rather than institutions such as the IMF or World Bank.
"The
depreciation of local currencies, often related to the recent commodity
price decline, has inflated foreign currency debt for several
sub-Saharan African sovereigns," Standard & Poor's added.
'DEBT TRAP'
A
study by the French Treasury said the IMF-World Bank initiative had
slashed the average external public debt of the 30 African countries
from the equivalent of 119 per cent of annual economic output to just 33
percent between 2000 and 2014.
Yet some are now sliding deeper into debt at a "very sustained pace", the Treasury said.
Of
the 30 African countries that had previously secured international debt
relief, 13 have pushed up their debt levels by the equivalent of 10
percentage points of annual gross domestic product (GDP) in the past
five years, it said.
The Republic of Congo led the
list, with its external debt rising by 25 percentage points as a
proportion of annual GDP, followed by Niger, up 23 percentage points,
and Malawi, up 19 percentage points.
There is no short-term risk of a new debt crisis for the great majority of African countries, the French Treasury said.
But
"a small number of them have seen a period of very sustained debt
growth", it said, warning that they could soon return close to the
levels of external debt that reigned before the global debt relief
initiative.
Seven countries faced the risk of elevated
debt levels at the end of 2015, the Treasury said: Burundi; Cameroon;
Central African Republic; Chad; Ghana; Mauritania; and Sao Tome and
Principe.
"We must ensure we do not fall again into the
debt trap," African Development Bank president Akinwumi Adesina warned
at a conference of business leaders in Abidjan this month.
Despite a recent rise in debt levels, African countries remain less indebted than many advanced economies.
"The
total public debt of Africa amounted to 38 per cent of continental GDP
in 2014 compared with 111 per cent for OECD nations," said Carlos Lopes,
executive secretary of the UN Economic Commission for Africa.
"Debt
levels will deteriorate in countries with a weak level of budgetary
discipline and those that have borrowed excessively," Lopes said.
He urged countries to strengthen debt management capacity and to report on how they are using their borrowed funds
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