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The Economist Intelligence Unit (EIU), in their recently updated 2023 Africa Outlook Report, indicates that several African nations are poised to face significant challenges with regards to their debt servicing burdens.
Ghana, Tunisia, Egypt, Congo-Brazzaville, Zambia, Zimbabwe, and Mozambique are all expected to grapple with debt servicing that will consume a substantial portion of their revenue in the year 2023.
The EIU’s report highlights a concerning trend in which African governments have substantially increased their borrowing, both domestically and internationally. As a result, public sector debt ratios relative to GDP have surged, approaching levels not seen since the early 2000s, just prior to the extensive debt restructuring of 2005, which occurred as part of the Heavily Indebted Poor Countries (HIPC) initiative.
The EIU’s report paints a challenging picture for the mentioned African countries, emphasizing the significant debt burdens they face, relative to their GDPs. This situation is expected to put tremendous pressure on their governments as they endeavor to service these debts in 2023. Moreover, with the looming prospect of more capital repayments due in 2024, the situation may become even more arduous.
Additionally, the EIU points out that while major economies such as Algeria, Angola, Ethiopia, Gabon, Kenya, Nigeria, and South Africa may have manageable levels of public debt, they are not immune to the challenges of rising debt-servicing costs. Nigeria, in particular, stands out due to the high expense associated with servicing its debt, despite a relatively low debt-to-GDP ratio.
As a result, these countries may face mounting pressure to implement economic reforms, potentially including changes to subsidy programs and tax structures, as well as reductions in public-sector spending. However, the extent of these changes may depend on upcoming elections and the evolving political landscape in these nations.
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