Business Insider Africa presents the top 5 African countries with the worst debt crises in 2023This list is courtesy of The East African, a news platform centered around news reports on events in Africa, particularly the East African sub-region.The list is also a result of the upcoming meetings between finance ministers, and political leaders gathering next week for the World Bank Group and International Monetary Fund (IMF) conference.
Debt has become a major problem for developing countries over the past few years. These countries continue to face macroeconomic challenges that hinder them from servicing their debt, and by extension, growing their economies.
As a result, such countries face reduced economic growth and are forced to explore the option of debt restructuring, otherwise, they face the risk of financial instability and a full-on economic meltdown.
This subject remains a pressing issue that affects the global economy and is in constant need of addressing.
As central bankers, finance ministers, and political leaders gather next week for the World Bank Group and International Monetary Fund (IMF) spring meetings, the record number of developing countries in danger of a debt crisis will be high on the agenda.
Inflation, rising borrowing rates, and a strong dollar have made repaying debts and generating funds much more difficult for dozens of poor countries, forcing many to default last year.
Below are 5 African countries with the most prevalent debt issues, which may be discussed in the upcoming meetings. This list is courtesy of The East African, a news platform centered around news reports on events in Africa, particularly the East African sub-region.
Ghana: Ghana is experiencing its greatest economic crisis in a generation, with debt payments accounting for more than 40% of government income last year. It became the fourth nation to seek a revision under the G20 Common Framework in January. In December, the West African country won a $3 billion accord with the IMF, though it still needs finance assurances from bilateral lenders to finalize the deal.
Malawi: Malawi is dealing with currency shortages as well as a budget deficit of 1.32 trillion kwachas ($1.30 billion), or 8.7% of GDP. The donor-dependent Southern African country is attempting to restructure its debt to get further IMF money, which was authorized in November.
Zambia: Zambia is expected to be the first African country to default during the Covid-19 period in 2020, serving as a litmus test for the G20’s Common Framework program, which was established during the epidemic to ease debt restructurings. Yet, negotiations have been painfully delayed, and external debt has risen to $18.6 billion. Zambia’s currency, the kwacha, has plummeted more than 10% versus the US dollar this year, contributing to inflation, according to the country’s central bank. It attributed the reduction in part to debt restructuring delays.
Tunisia: The tourism-dependent North African economy is suffering from a painful crisis that has resulted in a scarcity of essential food goods. A $1.9 billion IMF loan has been blocked for months due to Tunisia’s president’s lack of progress on critical reforms. Most debt is local, although repayments on international loans are due later this year. Tunisia may default, according to credit rating firms.
Egypt: In December 2022, Cairo received a new $3 billion IMF package by agreeing to a flexible currency, a larger role for the private sector, and a slew of monetary and fiscal changes. Import and currency restrictions have hampered economic activity, and a foreign currency shortage persists despite three significant devaluations that have half the value of the pound since March 2022. Inflation is presently at a more than five-year high of more than 30%.