A new report by the Beijing-based consultancy Development Reimagined provides some badly-needed context for the broader discussion about the burgeoning debt crisis in certain African countries.
The analysis focused on whether African countries will have sufficient funds available to provide for both ongoing debt servicing and higher social welfare costs brought on by the worsening COVID-19 outbreak in many countries.
What they found, and this should have been obvious, is that Africa as a whole does not face a debt crisis, because the overwhelming majority of loans to the continent (84%) are concentrated in just 16 countries.
Key Highlights From Development Reimagine’s Analysis on African Debt Levels
- IS THERE ENOUGH MONEY? “Our analysis reveals that we should be concerned right now about whether African countries have enough room in their budgets to pay for all the higher costs they are facing due to COVID19 – both in terms of the direct health costs and also the economic costs people and businesses are having to face because of the global slowdown in flows of trade, finance and people as well as social distancing. Our analysis shows that the total debt repayments owed by African countries in 2018 were 1.4 times larger than the budgets that African countries have now put aside to address the effects of COVID19 (which, incidentally, have risen by US$9bn since our last estimate two weeks ago, to US$53bn in total now).”
- IS THERE REALLY A DEBT CRISIS? “Despite this really challenging situation, our analysis also reveals that we are skeptical of claims of a debt crisis. Yes, debt levels of African countries are higher in absolute terms than ever, but their economies are doing better than ever too.”
- SOME COUNTRIES ARE WORSE OFF THAN OTHERS: “Our analysis reveals that debt in the majority of African countries is very small compared to global debt and global GDP. Yes, there are certain countries that indicate challenges, such as debt levels larger than the current size of their economies (only 2 African countries Djibouti and Mozambique), or over 40% of their debt lent by the private sector (Mauritius, Nigeria, and Zambia – NB: the private sector was the most intransigent in renegotiating/cancelling debt in the 1990s and 2000s for the poorest countries), or interest rates of over 15% on the debt owed (3 African countries Mauritius, Djibouti and Angola). However, this does not account for the majority.”
Read the full report and infographics on the Development Reimagined website.
