1.19 Government Debt in Sub-Saharan Africa

Over two-thirds of the countries in the region with elevated debt— above 70 percent of GDP—are non-resource-rich countries. (figure 1.19). Debt dynamics FIGURE 1.19: Government Debt in Sub-Saharan Africa (% of GDP) in the region are partly 80 associated with movements 70 in commodity prices. A higher debt burden is 60 also associated with rising Percent of GDP 40 50 policy rates in advanced economies—which push up debt servicing costs— 30 and weak growth for most countries. Over two-thirds of 20 the countries with elevated 10 debt—above 70 percent of 2016 2017 2018 2019 2020 2021 2022e 2023f 2024f GDP—are non-resource-rich Sub-Saharan Africa, median Oil exporting countries in SSA countries. Five countries— Mineral and metal exporters in SSA Non-resource-rich countries in SSA Eritrea (234.9), Sudan (183.8), Source: World Bank staff projections. Cabo Verde (147.7), Ghana Note: e = estimate; f = forecast; GDP = gross domestic product; SSA = Sub-Saharan Africa. (104), and Mozambique (102.6)—will register debtto-GDP ratios above 100 percent. The Republic of Congo is the only oil-rich country that makes the list with public debt expected at 84 percent of GDP. The country has been struggling with high public debt since the collapse of oil prices in 2014, as it jumped from 42.3 to 74.2 percent of GDP in 2015. It rose further to 113.2 percent in 2020 as the pandemic broke out and has since been on a downward trajectory. It is projected to decline further to 76.3 percent in 2024. Mozambique’s deal with the IMF should help the country’s management of public finance, containing debt from rising further, and freeing fiscal space. The favorable terms of trade arising from high coal and aluminum prices will provide ample fiscal revenue, which is essential to reduce the country’s debt. Excluding South Sudan, debt is set to decline for oil-rich countries to 51.5 percent of GDP in 2022, from 59 percent in 2021. In addition to the gain the countries will receive from export earnings boosted by high oil prices, they have initiated reforms to increase revenue. Debt will decline by double digits in Angola (23.8 percentage points), the Republic of Congo (18.2 percentage points), and Equatorial Guinea (12.9 percentage points). In Angola, a strong kwanza as well as the external receipts from high oil prices will help to bring debt down to 61.9 percent from 85.7 percent recorded in 2021. Debt rose sharply above the 100-percent mark in 2019 and firmed with the pandemic to 130.7 percent of GDP. Albeit at a low level (37.6 percent), public debt in Nigeria is a concern as the country recorded a high debt service-to-revenue ratio (118.9 percent) between January and April. Debt pressures have increased as debt service to revenue is projected to increase to 102.3 percent by end 2022. This suggests that high oil prices do not translate into government receipts due to elevated subsidies for petroleum products. The combination of low production in the oil industry and unsustainable subsidies is one of the main obstacles to attaining debt sustainability.