The International Monetary Fund (IMF) has warned that debt servicing is becoming more of a burden especially in Africa’s oil-rich nations, particularly Nigeria and Angola and that such costs could absorb up to 60 per-cent of the countries’ government revenues in 2017, and in Gabon as well.
Public debt rose above 50 per-cent of gross domestic product (GDP) in 22 sub-Saharan African countries by the end of 2016, according to IMF figures.
In its regional economic outlook unveiled in Abuja on Thursday, IMF observed that fiscal risks are also beginning to show up in several fast-growing non-resource intensive countries, partly reflecting security developments and a decline in cocoa prices, citing Côte d’Ivoire and fiscal slippages during election like in Ghana and Kenya.
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The Fund noted that economies in the region are burdened by large fiscal deficit while fiscal pressures pose risks to the weakened financial sector in Nigeria and other sub-Saharan Africa countries.
Amine Mati, IMF Senior Resident Representative who unveiled the report titled “Fiscal Adjustment and Economic Diversification,” said fiscal consolidation strategies needed to be implemented in the region.
According to him, debt stocks have risen throughout the region, though exchange rates pressures have eased in many countries, including Nigeria.
He said diversification offers a growth path, adding that the region has significant potential for raising revenues.
The IMF projects a GDP growth of 2.6 per-cent for the region in 2017 but says while growth has picked up, it will remain subdued.
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“Growth is expected to pick up from 1.4 per-cent in 2016 to 2.6 per-cent in 2017, reflecting the one-off factors particularly the rebound in Nigeria’s oil and agricultural production, the easing of drought conditions that impacted much of eastern and Southern Africa in 2016 and early 2017 and a more supportive external environment,” IMF said in the report.
“While 15 out of 45 countries continue to grow at 5 per-cent or faster , growth in the region as a whole will barely surpass the rate of population growth and in 12 countries, comprising over 40 per-cent of sub-Saharan Africa’s population income per capita is expected to decline in 2017.
“A further pick-up in growth to 3.4 per-cent is expected in 2018, but momentum is weak and growth will likely remain well below past trends in 2019. Ongoing policy uncertainty in Nigeria and South Africa continues to restrain growth in the regions two largest economies.
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“Excluding these two largest economies, the average growth rate in the region is expected to be 4.4 per-cent in 2017, rising to 5.1 per-cent in 2018-19.
“But even where growth remains strong, in many cases it continues to rely on public sector spending, often at the cost of rising debt and crowding out of the private sector,” the IMF said.
The IMF, however, in the report noted that the region recorded a modest growth recovery but that the recovery is not strong enough to raise the gross domestic product (GDP) per capita in many countries of the region.
Mati, speaking on the report stressed that oil-exporting economies like Nigeria are recovering and that inflationary pressures are receding.
According to him, African economies needed to get the right policy mix to maximize their huge potential.
“Broad-based slowdown in sub-Saharan Africa is easing, but the underlying situation remains difficult,” he stated.
Onyinye Nwachukwu, Abuja
