AFRICA is a long way from facing a debt crisis even as commercial lending to the continent soars and Mozambique became the first regional country to miss a payment on a dollar loan this year, according to a senior official at the African Development Bank.
Debt levels across the continent’s 54 countries average 17% to 18% of GDP, which is low, Abebe Shimeles, acting director in the AfDB’s development research department, said Thursday in an interview at the lender’s annual meetings in Lusaka, Zambia’s capital.
“In terms of the continent we are not even close, forget about crisis, we are not even close to a debt burden, especially the external debt,” said Shimeles.
“It’s not systemic now. It’s not that all African countries are exposed to a debt crisis. The bad news is sometimes heard faster than the good news.”
Countries on the continent raised $26 billion in Eurobonds from 2006 to 2014 and a further $12 billion last year, AfDB President Akinwumi Adesina said on May 24 when he officially opened the meetings, warning a debt crisis must be avoided.
While foreign-currency debt has soared, currencies on the continent have weakened, making repayments more costly as economic growth slows.
“Some countries have also experienced a spike in their debt levels that may be worrying in particular cases, unless they take measures to contain it,” Shimeles said.
Learn from past mistakes
“The AfDB and other multilaterals can learn from previous mistakes and really step in with a solution to manage the debt, restructure it and also undertake some necessary reforms before we reach a level of crisis.”
The bank would consider assisting countries that ask for it, and could work with other lenders including the International Monetary Fund, he said. Nigeria is already in talks with the AfDB for a $1 billion facility.
Growth on the continent will probably exceed the 4.5% the AfDB forecast for 2017 in a report published this week, Shimeles said. Domestic demand in Ethiopia, Nigeria and Sudan will lead to “much higher” economic expansion, he said.
“I believe that Nigeria has now taken the right steps in terms of the macro-economy,” he said.
Africa’s biggest economy this month cut fuel subsidies and signalled a more flexible exchange rate policy for the naira, which has been pegged to the dollar for 15 months.
“We are optimistic,” said Shimeles. “Still, this doesn’t mean we deny the headwinds. They are strong but I think the economies are resilient.” (Bloomberg)