Figure 1.21: Evolution of Public Debt in Sub-Saharan Africa

Steep increases in public debt across Sub-Saharan African countries before the COVID-19 crisis. In South Africa, the (seasonally adjusted and annualized) current account surplus widened from R261 billion in 2021Q1 to R343 billion in 2021Q2—an increase of 1.3 percentage points in GDP to 5.6 percent of GDP in the second quarter. It is expected that the unrest and the cyberattack on Transnet’s operations will likely affect exports in 2021Q3. The trade surplus accelerated to R614 billion in 2021Q2 thanks to a protracted upward trend in merchandise exports, which registered a quarterly increase of 13.2 percent to R1.83 trillion in 2021Q2. In turn, the rebound in exports was supported by favorable terms of trade, an increase in export volumes, and improvements in global demand. Imports increased by 3.4 percent on a quarterly basis to R1.31 trillion in 2021Q2. Hence, the trade surplus increased from 7.5 percent of GDP in 2021Q1 to 10 percent in 2021Q2.

Debt vulnerabilities continue increasing amid the pandemic.

Public debt levels across Sub-Saharan African countries experienced a steep increase, which predated the COVID-19 crisis. On average, the general government gross debt is projected at 71 percent of GDP by 2021, an increase of 30 percentage points of GDP since 2013 (figure 1.21).9 Higher debt ratios coupled with increased reliance on more expensive financing sources have pushed up interest payments for the region. Increasing reliance on funding on commercial terms, partially reflecting the recent surge in Eurobond issuances, has raised the exposure of Sub-Saharan African countries to interest rate, exchange rate, and rollover risks. As of August 2021, Sub-Saharan African countries have raised US$9 billion in Eurobonds—an amount that is higher than the US$5.9 million raised throughout 2020 (figure 1.22). The largest issuer as of August 2021 was Ghana, with US$3 billion, the first Sub-Saharan African country to issue a Eurobond in dollars since the onset of the pandemic. This capital raising is part of the US$5 billion financing to support growth-oriented expenditures—as stipulated in the 2021 government budget. In September, Nigeria raised US$4 billion in Eurobonds in a sale that attracted offers of four times the amount that the government initially planned to raise. The country issued the debt in three tranches of three tenors. It raised US$1.25 billion for seven years at a yield of 6.125 percent and sold a 12-year bond at 7.375 percent to fetch US$1.5 billion. A 30-year 0 tranche of US$1.25 billion was sold at 8.25 percent.

The COVID-19 pandemic has amplified debt vulnerabilities in the region.

FIGURE 1.21: Evolution of Public Debt in Sub-Saharan Africa (percent of GDP) 140 120 100 80 60 40 20 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 25-75 percentile Average Median

Sources: World Economic Outlook April 2021; World Bank staff estimates.