Sub-Saharan Africa’s external debt is projected to increase by 52.32 per cent to $863.38bn in 2024 from $566.84bn in 2016, according to a report by research and consulting firm, Financial Derivatives.
According to the report, in 2023, sub-Saharan Africa faced a myriad of challenges, including coups, debt, currency pressures, and high inflation, leading to a decline in real GDP growth to 2.9 per cent from 3.7 per cent in 2022, per the World Bank.
Despite these, the report predicted that the region is expected to grow by 3.8 per cent in 2024, outpacing growth in advanced economies, projected to grow at 1.2 per cent in 2024 as new growth enhancers like Tanzania and Ivory Coast sustain growth rates above 6 per cent.
It said key macroeconomic challenges facing the dominant economies in the region must be addressed, emphasizing the need for policymakers to be proactive in returning the region to its pre-pandemic and pre-Russia-Ukraine-war growth levels.
It read in part, “For instance, having accumulated debt in the pre-COVID low-interest-rate era, SSA countries now grapple with expensive debt-servicing due to global interest rate hikes.
“Yields on Kenya’s Eurobond repayment due June 2024, reached 15.65 per cent in November 2023, 2.55 per cent higher than 13.1 per cent at the start of 2023, even as the risk premium on African debt continues to mount in an unforgiving global interest rate environment. SSA’s external debt is projected to increase by 52.32 per cent to $863.38bn in 2024 from $566.84bn in 2016, according to the EIU.”
The report warned that specific risks to growth prospects abound from excessive debt, high inflation, currency pressures, political unrest and military conflicts, especially in the Sahel.
It noted that 2024 is unarguably the largest global election year in history with over 16 African nations set to conduct presidential and legislative elections, including South Africa, Rwanda, Namibia and Ghana.
The report also stated that sub-Saharan African nations are anticipated to enhance intra-African trade, expand their revenue sources and buffers, and prioritise infrastructure development.
This move, it said, could shield SSA countries from the direct impact of China’s economic slowdown due to its lingering property sector crisis and slow growth.
It read further, “The IMF projects a 4 per cent growth for sub-Saharan Africa in 2024, 0.2 per cent higher than the World Bank’s forecast of 3.8 per cent. The expected growth is attributed to a rebounding global economy, larger investments in the oil, gas, and renewable sectors, and high prices for Africa’s hydrocarbons, mining, and agricultural products.
“The service sector is also expected to be a major driver of growth, particularly in eastern African countries such as Uganda and Rwanda, with 2024 growth expectations of 6 per cent and 7.5 per cent, respectively, fueled by the tourism, financial, and telecommunication industries.”