International Monetary Fund (IMF) experts are recommending that African countries implement a comprehensive strategy, including austerity and debt restructuring, to avoid concerns of a sovereign debt crisis in sub-Saharan Africa.
“The IMF team’s analysis shows that most countries in the region will need to reduce their budget deficits in the coming years; for the average country the level of adjustment will be 2 to 3% of GDP, but this adjustment seems feasible given past historical developments. experience, as most sub-Saharan African countries have improved their primary deficit [sem juros da dívida] at 1% per year for two to three years,” the IMF technicians write.
In its analysis note on the sovereign debt crisis in sub-Saharan Africa, the IMF adds: “Not all countries face the same challenge; About a quarter of the region’s economies have fiscal space and can use it to maintain and even increase vital investments in human and physical capital, but there are also countries that have very high adjustment needs, and for these countries it is unlikely that only fiscal consolidation will take place. sufficient to ensure fiscal sustainability, and this policy may need to be complemented by debt reprofiling or restructuring.”
The recommendation of IMF technicians is reflected in a study signed by African Department economists Fabio Comelli, Peter Kovacs, Jimena Jesus Montoya Villavicencio, Arthur Sode, Antonio David and Luc Eyraud, entitled ‘Navigating fiscal challenges in sub-Saharan Africa: resilient’ and credible anchors in turbulent waters”, which warns about the development of the debts of African countries.
“The debt ratio in the region has almost doubled in just ten years, from 30% at the end of 2013 to almost 60% at the end of 2022,” they warn, noting that more than just the increase in the debt ratio and GDP, it is the costs and the ability to pay that are at stake.
“Repaying this debt has also become much more expensive,” they warn, adding that “the ratio between the level of interest payments and the amount of tax revenue, a fundamental metric for measuring the ability to service the debt unloading and predicting the risk of a fiscal crisis, has more than doubled since the beginning of the last decade and is now almost four times that of advanced economies.”
Last year, the IMF economists add, “more than half of low-income countries in sub-Saharan Africa were assessed by the IMF as being at high risk of, or developing into, debt problems.” already found.” [‘debt distress’, no original em inglês]”.
To prevent a new debt crisis, such as the one that led to the debt cancellation initiative for highly indebted countries at the beginning of this millennium, the IMF proposes five priorities: implementing a long-term policy strategy, increasing domestic tax revenues, of budget cuts, strengthening institutions and mobilizing people to avoid a debt crisis.
Source: DN
