Debt, pending bills batter Africa economies in 2024
Sunday April 21 2024
Street vendors wait for customers at an open market in Awka, Anambra State, Nigeria on February 23, 2023. PHOTO | REUTERS
Several African countries reeling under the weight of economic and political problems are banking on rescue interventions from the World Bank and the International Monetary Fund (IMF), which are now holding their annual spring meets in Washington DC.
Ghana is in debt distress; public debt is unsustainable and the government has embarked on a comprehensive debt restructuring plan, a significant fiscal consolidation programme, and the implementation of reforms to foster economic stability and resilience.
Stabilisation efforts are being supported by the IMF’s Extended Credit Facility programme to about $3 billion.
According to the World Bank, the crisis has taken a heavy toll on the pace of economic growth in the country which decelerated to an estimated 2.9 percent in 2023 and is projected to remain weak in 2024.
Read: Yield-hungry investors to blame for Africa debt crisis
“Returning growth to its potential rate of five percent will require macroeconomic stability,” the World Bank says.
In South Sudan, President Salva Kiir is facing a tough battle reversing an economic downturn that has pushed more than eight million people into poverty as oil production, the nation’s chief revenue earner, drops on depleted wells and military conflict in neighbouring Sudan.
Starved of donor funding for lack of political will to implement the 2018 peace agreement, Juba is trying to squeeze resources from the already overburdened oil sector.
Four consecutive years of intense flooding and the fallout from Russia’s invasion of Ukraine have aggravated an already difficult economic and humanitarian situation in the world’s newest nation grappling with a civil war that erupted in 2013 claiming the lives of two million people and forcing about a quarter of the population to flee to neighbouring countries.
The war has stifled oil production in a country with an estimated population of 11.27 million which was also hit hard by the Covid-19 pandemic in 2020.
Nigeria, Africa’s largest economy, is facing an economic crisis ranging from a failed currency redesign to the removal of fuel subsidies and a currency float.
The nation has been plunged into spiraling inflation and a currency crisis with far-reaching consequences.
Read: Nigerians to pay more for electricity under new tariff plan
According to IMF’s Regional Economic Outlook Report For Sub-Saharan Africa dated October 2023, Nigeria in June 2023 removed fuel subsidies of $10 billion — four times the sum spent on health.
Most of these subsidies were poorly targeted and tended to benefit affluent segments of the population.
“Moreover, a significant amount of fuel was being smuggled out of the country, rewarding the rent-seeking behaviour of a small number of individuals and effectively subsidising consumers (or distributors) in neighbouring states,” says the IMF.
Zambia is grappling with a debt restructuring deal with its international bondholders after becoming Africa’s first pandemic-era sovereign default when it missed a $42.5 million payment on one of its international bonds in November 2020.
The Spring Meetings bring together boards of the IMF and the World Bank Group, central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organisations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
In March, Zambia reached a debt restructuring deal-in-principle with its international bondholders, bringing the country close to finishing a complex process that has lasted more than three years and been beset by numerous delays.
Read: Zambia debt deal: Is it relief or new bondage?
In Sudan, the war has claimed thousands of lives, forced millions from their homes, and sparked economic turmoil across the region that is deepening the hunger crisis, according to a UN humanitarian information portal, ReliefWeb.
Food prices in Sudan are 73 percent higher than 2023 and 350 percent above the five-year averages, exacerbated by the currency’s devaluation. The ripple effects are felt in South Sudan and Chad where disrupted trade and massive population displacements are straining resources and intensifying hunger.
This economic turmoil risks pushing one million people into severe food insecurity in South Sudan, where already over half the population – 7.1 million people – are acutely hungry.
Other countries facing economic challenges are Egypt, Somalia and South Africa.