The economic fundamentals in a growing number of Africa’s major economies are showing signs of rapid deterioration amid the ongoing economic crisis brought on by the COVID-19 pandemic. Seemingly every week there’s a new downgrade, analyst warning, or economic indicator that points to an increasingly dire situation for some of the continent’s largest and most important economies.
Last week, Kenya’s National Treasury and the parliamentary budget office issued fresh warnings about the country’s rapidly increasing debt load, and both sounded the alarm that the country now faces “a high risk of external debt distress.“
As the country’s largest bilateral creditor, with about $6.47 billion of outstanding loans, China plays a critical role in Kenya’s debt sustainability. In July, there were reports that talks between the two sides over restructuring Kenya’s vast Chinese loan portfolio had broken down. It’s not clear at this time if those discussions have resumed.
Kenya’s current public debt stands at $61.7 billion which is about 65% of its GDP. Generally speaking, debt distress concerns become more acute once the debt-to-GDP ratio passes the 50% mark. (BLOOMBERG)
Mounting Debt Sustainability Concerns in Both South Africa and Nigeria
- SOUTH AFRICA: The pandemic has left government finances in South Africa “dangerously overstretched” and heightened debt threatens the country’s future economic prospects, Finance Minister Tito Mboweni wrote in an opinion piece for Johannesburg’s City Press. (CITY PRESS)
- NIGERIA: The country’s external debt stock jumped by 13.78% to $31.48 billion, according to the Debt Management Office. While Nigeria’s overall debt-to-GDP ratio still remains relatively modest, the key concern here is that persistently low oil prices, reduced trade receipts and new multilateral loans from the IMF and others will hamper Abuja’s ability to repay its loans. (NAIJA 24/7 NEWS)
It’s important to note that both South Africa and Nigeria have not borrowed heavily from China, according to the China-Africa Research Initiative’s interactive loan database.
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