Sub-Saharan Africa’s debt burden increased to a record $789 billion in 2021, highest since 2010

Low economic growth, skyrocketing inflation, the Ukraine war, massive debts and climate change increased the region's dependancy on private creditors
Sub-Saharan Africa’s debt increased by over 2.4 times between 2010 and 2021. Photo: iStock.
Sub-Saharan Africa’s debt increased by over 2.4 times between 2010 and 2021. Photo: iStock.
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The world’s poorest countries continued to borrow in 2021 due to the pandemic-induced disruptions to economic activity and supply chains, according to a new World Bank report.

The debt of low- and middle-income countries in sub-Saharan Africa (SSA) increased to a record $789 billion in 2021 from $702 billion in 2020, according to the report released December 6, 2022. This is the region’s highest debt burden since 2010.

In 2010, the region’s debt stood at around $305 billion. SSA’s debt increased by over 2.4 times between 2010 and 2021, according to the ‘International Debt Report 2022’.

The current figure includes long-term external debt ($636 billion) and short-term external debt ($85 billion).

Beyond repayment capacity

The region’s current debt burden is beyond its repayment capacity. Globally, as economic growth resumed following the global recession in 2020, external debt as a share of Gross National Income (debt-to-GNI ratio) returned to pre-pandemic proportions.

However, this was not the case for countries in SSA. The debt-to-GNI ratio of the region improved marginally by 2.9 percentage points compared to 2020 figures and remained above the pre-pandemic level at around 43 per cent. 

This marginal improvement in the debt-to-GNI ratio is likely to be temporary, the World Bank alerted. Since 2010, the ratio has increased by 19 percentage points.

Rising interest rates and slowing global growth imply that many countries may reel under debt crises.

Countries in SSA are projected to grow by 3.6 per cent in 2022, down from 4.7 per cent in 2021, according to the latest edition of Regional Economic Outlook for Sub-Saharan Africa.

In June 2022, the World Bank warned of an imminent stagflation ( a stagnation in economic activity combined with high inflation). This may push more countries into a debt crisis, warned International debt statistics, 2022.  

“The impacts of the global recession in 2023 may continue even into 2024 and 2025,” said World Bank Group president David Malpass in his remarks during the Launch of the International Debt Report 2022.

In October 2022, the inflation in SSA was nearly double the pre-pandemic levels, risking social and political instability and worsening food insecurity, according to an estimate by the International Monetary Fund.

There is a need for policies to address inflation without exacerbating the risk of recession, as the World Bank suggested.

While economic growth in the region has been impacted by the combined effects of skyrocketing inflation, the Ukraine war, massive debts and climate change, the dependency on private creditors has increased. 

At the end of 2021, countries in SSA owed 46 per cent of their public and publicly guaranteed debt to private creditors — an increase of around 11 percentage points from 2010 

In 2010, these countries owed around 35 per cent of their public and publicly guaranteed debt to private creditors.

There is a need to improve debt transparency to strengthen the ability of countries to manage debt risks and use resources efficiently for sustainable development, said the report.

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