In 2017, the International Monetary Fund (IMF) categorized 15 Sub-Saharan African countries as being in debt distress or at high risk of it. Since then, a series of economic shocks—including the COVID-19 pandemic, dramatic spikes in food and fuel prices due to the Ukraine conflict, and a rising dollar—have intensified the crisis. Today, 23 countries in the region face unsustainable debt burdens. Surprisingly, only a few have defaulted.
Ghana and Zambia are the only two states that have stopped servicing their external debts, while Chad, Ethiopia, and Malawi have sought to restructure their obligations. The anticipated wave of defaults has not materialized, leading some to wonder if initial assessments exaggerated the risks or if these nations have found ways to alleviate their debt burdens.
However, the reality is far from reassuring. Despite temporary debt relief provided by G20 countries and the IMF’s issuance of $650 billion in Special Drawing Rights to inject liquidity, African governments have been forced to slash critical spending on health, education, and public investment. To avoid defaulting on their external debts, they are defaulting on their commitments to future generations.
In Kenya, debt-service costs have tripled over the past six years, now consuming nearly 60% of public revenue. During the same period, development spending—including essential sectors like education and health—has been halved. Some ministries are struggling with arrears. The chief economic advisor to the Kenyan president highlighted the dire situation by tweeting, “Salaries or default? Take your pick.”
Sierra Leone, one of the world’s poorest nations, is expected to see real (inflation-adjusted) public spending per person drop by 20% this year compared to 2015. Meanwhile, debt-service payments have more than doubled. In the four years leading up to its default, Zambia reduced public spending by 20%.
These stark examples underscore a troubling trend: The efforts to avoid debt defaults are coming at the expense of essential public services and investments that are crucial for long-term development. By prioritizing external debt repayments, these countries risk undermining their future economic growth and the well-being of their populations.
The situation calls for urgent attention from the global community. Without comprehensive solutions that address the root causes of the debt crisis, African nations may find themselves in an even more precarious position, with devastating consequences for their citizens and potential ripple effects on global economies.
Reference(s):
cgtn.com
