Since 2017, the International Monetary Fund (IMF) has identified 15 Sub-Saharan African countries at risk of debt distress. The economic turmoil caused by the COVID-19 pandemic, the Ukraine war, and a rising dollar has only intensified this crisis, with 23 countries now facing unsustainable debt burdens.
Surprisingly, despite these high risks, only a handful of nations have defaulted. Ghana and Zambia have ceased servicing their external debts, while Chad, Ethiopia, and Malawi have sought to restructure their obligations. This raises important questions: Have the initial risk assessments been overstated, or have these countries and their creditors found ways to mitigate the crisis?
However, the situation remains dire. Even with temporary debt relief from G20 nations and the IMF's issuance of $650 billion in special drawing rights (SDRs), African governments have had to make drastic cuts to essential services. Health, education, and public investment are seeing reduced budgets to meet debt obligations, placing future generations at a significant disadvantage.
In Kenya, debt-service costs have tripled over the past six years, now consuming nearly 60% of public revenue. This has led to a 50% reduction in development spending, with some government ministries falling into arrears. As Kenya’s chief economic advisor highlighted, the country faces a tough choice between paying salaries or defaulting on debts.
Sierra Leone, one of the world's poorest nations, is experiencing a 20% decrease in real public spending per person compared to 2015, while debt-service payments have more than doubled. Similarly, Zambia had to cut public spending by 20% in the four years preceding its default.
These examples underscore a troubling reality: in striving to avoid defaults, African nations are compromising their investments in health, education, and infrastructure, thereby undermining their own development and the well-being of their citizens.
Reference(s):
cgtn.com
