Economists Warn of Increased Debt in African Countries

  • Botswana among countries expected to record a budgetary deficit of about P8 billion in 2017
  • Budgets of Sub-Sahara African countries shifted from a surplus of 0.6% between 2006 and 2008 to a deficit of 2.2% in 2016


Economists have cautioned that government debt in Africa could increase as countries in the continent are inclined to borrowing money from global financing market to narrow their fiscal deficits.
In the World Bank’s October 2017 Africa Pulse report which analyzed trends in African economies, the bank’s economists stated that the budgets of Sub-Saharan African countries shifted from a surplus of 0.6% between 2006 and 2008 to a deficit of 2.2% in 2016. Figures from the report show that following the deficit, borrowing in the region increased and debt issuance increased from an average of US$3.5 billion in 2010–13 to US$6.2 billion in 2014-17.
World Bank economists state that as the global economy continued to strengthen in 2017 and financing conditions remain favorable, Sub Saharan Africa countries with budgetary deficits are highly likely to borrow more money to supplement their budgets, a development which could result with rising debt in the region. “Global financing conditions are generally supportive. International bond and equity flows in the region are increasing, and are helping to finance the current account deficits and cushion foreign reserves,” said the economists.
Botswana is among Sub Saharan Africa countries which are expected to, this year, record a budgetary deficit amounting to around P8 billion and opposition political parties warned that if government decides to borrow to supplement development budget it could find itself with increased debt and inefficient projects, due to low accountability in spending in mega projects. Due to budgetary deficit, Botswana is among Sub Saharan African countries which started borrowing, she recently borrowed a loan amounting to P1.5 billion from the global financial market to finance expansion of water infrastructural projects, a decision which is expected to increase government debt.
The World Bank has revealed that the largest increase in debt burdens since 2013 has been observed in oil exporters, with Angola, Chad, the Republic of Congo, and Gabon all seeing a higher increase in debt. The bank added that in Angola and Gabon’s debt is over 60 percent of GDP, in the Republic of Congo debt has risen above 100 percent. “Government debt in 2017 is projected to rise but remain low in Nigeria and stabilizes in Chad but the two countries are expected to continue to face high debt servicing costs.”
The World Bank stated that among metal exporters, government debt continued to rise in Niger and is to exceed 50 percent of GDP in 2017. The bank noted that Mozambique defaulted on its debt in January 2017 and added that although the country’s public debt-to-GDP ratio appears to have declined, the debt burden remains unsustainable. “In South Africa, government debt in 2017 is expected to rise 2 percentage points to about 53 percent of GDP.”
The bank’s report points that among non-resource intensive countries, government debt in Ethiopia and Senegal is rising as these countries continue to borrow to finance ambitious infrastructure investment programs. In 2017, several countries, including Senegal, have tapped the international bond market to cover their financing needs. “With many other countries planning to return to the market, the higher cost of financing fiscal deficits on international credit markets at a time when U.S. policy interest rates are normalizing could increase sovereign risk across the region.”
The World Bank’s Africa Pulse report indicates that rising capital accumulation by the countries has not necessarily come along with greater efficiency of investment in spending and the decline in the efficiency of investment can be attributed, among other things, to; resource misallocation, poor human and physical capital complementarities, inefficiencies in the application of existing technologies, insufficient skills and other capabilities for the adoption of new technologies, and distortive public policies.