Sub-Saharan African nations are at growing risk of debt distress because of heavy borrowing and gaping deficits, despite an overall uptick in economic growth, the International Monetary Fund said on Tuesday.
The sober assessment came 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.
“What really we’re concerned about is the pace of increase, rather than the average,” IMF Africa Director Abebe Aemro Selassie told Reuters at the launch of its economic outlook for the region in Accra.
“What we’re calling for right now is that those countries are going to need to go through fiscal consolidation,” he said, adding that oil producers and other resource-dependent economies were seeking the sharpest growth in their debt loads.
The Fund projected the rate of economic expansion would rise to 3.4 percent this year, up from 2.8 percent in 2017, boosted by global growth and higher commodity prices.
Slower growth in South Africa and Nigeria - the continent’s two largest economies - weighed on 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 below 4 percent over the medium term.