The IMF said that the debt burden in Africa grew two and a half times and amounted to 14% of income

The International Monetary Fund (IMF) warned this Saturday that the debt-to-income ratio has increased two-and-a-half times over the past decade, to 14% of GDP, putting severe pressure on the budgets of least developed countries.

“Although the scale of the burden varies widely across countries, it is typically about two and a half times greater than ten years ago, meaning that for the average low-income country this percentage [da dívida sobre as receitas] rose from 6% to 14%, and in some economies even from 9% to 25%,” the IMF said.

In the note, signed by Allison Holland, director of the debt division of the department of strategy, policy and analysis, and director of the department, Ceyla Pazarbasioglu, the authors emphasize that this is one of the fundamental indicators in debt analysis. debt sustainability, “which signals whether a country is at risk of needing financial support from the IMF or at risk of defaulting on debt,” and note that financial pressures arising from high interest rates, in addition to the rate of debt growth that should pay poorer countries. This debt is squeezing budgets.

“This prevents countries from spending more on essential services or critical investments to attract investment, create jobs, improve prosperity and create a sustainable climate,” they warned.

In an article published on the IMF website, the authors stated that low-income countries, which include all Portuguese-speaking African countries (Cape Verde, Guinea-Bissau, Sao Tome and Principe and Mozambique), with the exception of Angola and Equatorial Guinea, will need to refinance about $60 billion (more than €55 billion) each year, three times the average for the decade ending in 2020.

Pointing to greater competition in attracting external funds, including from advanced economies that are also struggling to adapt to climate change, these experts warn: “There is a significant risk of a liquidity crisis, that is, an inability to obtain sufficient funds.” financing at an affordable cost, which in turn could lead to a destabilizing debt crisis.”

According to Allison Holland and Ceyla Pazarbasioglu, this difficulty in accessing affordable credit is due to increased debt and deficits to cushion the impact of the Covid-19 pandemic, higher interest rates by central banks and increased recourse to bailouts. to private creditors, which now account for about a third of the total, whereas previously loans from private investors accounted for only a fifth of the total debt of these low-income countries.

“These changes have increased not only the cost of financing, but also vulnerability to global financial shocks,” they warned, citing the use of donations or concessional financing, such as those offered by multilateral development banks such as the IMF itself and economic reforms.

“Increasing resilience requires action from countries, and some have already made progress, such as Angola, Gambia, Nigeria and Zambia, which have taken steps to implement energy subsidy reforms that create space for development spending, but many are still lagging behind , especially in efforts to increase the tax base,” the authors say, highlighting that the average country in sub-Saharan Africa will generate only 13% of GDP in revenue in 2022, which compares with 18% in other developing countries economy and 27% in advanced economies. markets.

They concluded that financing constraints need to be carefully monitored, since it is possible for a scenario in which cheap financing occurs, but there are also scenarios that show the need for more ambitious reforms, closer international cooperation, and faster improvements in the global debt architecture. restructuring to ensure that the economy emerges from the crisis stronger and more resilient.