Sub-Saharan countries continue to suffer from high debt levels

By Phyllis MUCHOKI

The majority of Sub-Saharan countries continue to suffer from high debt levels that push their economies to levels of crisis.

In addition to Ghana’s debt restructuring, Kenya recently pursued a voluntary switch bond issue in June 2020 and in December 2022, where holders of short-term debt valued at Sh25.6Billion and 87.8Billion, respectively, were given the option to switch to a longer-term debt of 6 years for each of the two switch bonds.

As such, the switch bonds received an overall subscription rate of 82.7% and 60.3%, respectively, while the rest opted to be paid upon maturity.

In June 2020 and December 2022, the Kenyan Government offered switch bonds for holders of government T-bills to voluntarily switch to two Infrastructure bonds namely; IFB1/2020/6 and IFB1/2022/6, with tenors to maturity of 6 years each.

The bonds received overall subscription rates of 82.7% and 60.3%, for IFB1/2020/6 and IFB1/2022/6, respectively, with the rest of the T-bill holders opting to hold and be paid upon maturity.

This came at a time when the yields of the government papers have been on an upward trajectory, gaining by 6.1 bps, 1.3 bps, and 2.3 bps to 10.4%, 9.8%, and 9.4% for the 364-day, 182-day, and 91-day papers respectively, for the first week of 2023.

In Nigeria, the Government sent a proposal to parliament in December 2022 for approval to allow for a restructuring of USD 54.0 Billion, short-term loans owed to its Central Bank to a 40-year security at an interest of 9.0%.

Nigeria’s Government had sent a proposal to parliament for approval to allow for a restructuring of USD 54.0 billion, short-term loans owed to its Central Bank to a 40-year security at an interest of 9.0%.

The debt was incurred through Ways and Means Advances to finance the government deficit as a result of delayed government receipts.

The Nigerian Executive also requested a three-year moratorium on interest payments on existing debts and asked for another USD 2.2 billion (N1.0 Trillion) debt from the Central bank on similar terms.

Similarly, Zambia initiated an external debt restructuring exercise in 2022 under the Common Framework for Debt Treatment of the G20, after a sovereign default in 2020 due to high debt unsustainability.

Initiated restructuring of its public debt in 2022 which involved forming a creditors committee that included all external lenders under the Common Framework for Debt Treatment of the G20. This after defaulting on its sovereign debt in 2020 and its debt to GDP ratio coming in at 140.2% in 2020 pointing towards debt distress.

It came after the USD 1.3 bn IMF assistance in August 2022, in which the debt restructuring was needed for the credit assistance to be approved.

Ghana’s domestic debt restructuring success is pegged on its reception to the bondholders since it is a voluntary exercise.

The government of Ghana is now expected to extend the exercise dates from the stated expiration date of 16th January 2023, and this will further delay the IMF assistance since it is one of the conditions that the government should implement before the credit assistance.

“Broadly, we expect more public debt restructuring initiatives to be taken by other SSA countries in 2023 due to debt unsustainability, worsened by the deteriorated macroeconomic environment in the region that impedes revenue collection to service debts,” offered investment firm, Cytonn.

In Kenya, the domestic debt accounted for 50.2% of its total public debt, with treasury bonds contributing 83.0% of the total domestic debt, with the majority of the bondholders being financial institutions such as banks and insurance companies.

Who do African countries owe most of their debt to?

A new report by Debt Justice has shown that many African countries owe three times more debts to West banks, oil traders and asset managers than they do to Chinese lenders. The report also revealed that these Western firms charge African countries double the interest rates, compared to their Chinese counterparts.

Which country has highest debt in Africa?

Eritrea: The national debt in this Horn of Africa country stands at 175.1% of the GDP. 2. Cabo Verde: This island nation has a debt-to-GDP ratio of 160.7%.

What is the brokest country in Africa?

Based on the per capita GDP and GNI values from 2020, Burundi ranks as the poorest country in not only Africa, but also the world. The second-poorest country in Africa, Somalia, holds the same distinction. In fact, this pattern carries through much of the list.

What is the only country with no debt?

There are countries such as Jersey and Guernsey which have no national debt, so the pay no interest. All this started with the Napoleonic wars when the government borrowed money to fund the war.

What are the 3 largest economies in Sub-Saharan Africa?

In nominal terms, Nigeria is the largest economy in Africa, followed by South Africa and Egypt. These three together account for almost half of the African economy.

Fastest Growing Economies in Africa as of 2022

Ethiopia. GDP growth in 2021 according to World Bank: 5.64%
Republic of the Congo. GDP growth in 2021 according to World Bank: 5.71%
Zimbabwe. GDP growth in 2021 according to World Bank: 5.85%
Senegal. GDP growth in 2021 according to World Bank: 6.06%
Benin.
Burkina Faso.
Morocco.