NAIROBI– The International Monetary Fund (IMF) has warned that sub-Saharan African nations are at growing risk of debt distress because of heavy borrowing and gaping deficits, despite an overall pick-up in economic growth.
This assessment comes as African countries continue to tap international debt markets and issue record levels of debt in foreign currencies, spurred on by insatiable investor demand for yields.
In its economic outlook for the region released on Tuesday, the Washington-headquartered IMF projected that the rate of economic expansion in sub-Saharan Africa would rise to 3.4 per cent this year, from 2.8 per cent last year, boosted by global growth and higher commodity prices.
Slower growth in South Africa and Nigeria, Africa’s two largest economies, have weighed down the region-wide average, but the IMF expects growth to pick up in around two-thirds of African nations. However, under current policies, that rate is expected to plateau at below 4.0 per cent over the medium term.
Meanwhile, around 40 per cent of the low-income countries in the region are now in debt distress or at high risk of it, the IMF said, adding that refinancing that debt could soon become more costly.
The current growth spurt in advanced economies is expected to taper off, and the borrowing terms for the region’s frontier markets will likely become less favourable which could coincide with higher refinancing needs for many countries across the region, it said.
Source: NAM NEWS NETWORK