Africa’s Nations Facing a Debt Crisis

The record number of developing nations at risk of a debt crisis will be high on the agenda this week when central bankers, finance ministers and political leaders convene for the World Bank Group and International Monetary Fund (IMF) spring meetings. 

Ballooning inflation, escalating borrowing costs and a strong dollar have made repaying loans and raising money significantly more expensive for dozens of developing nations, pushing several into default last year.

Below is a look at African nations that are facing a debt crunch or have already defaulted on international loans.

Egypt

Egypt’s tourism-dependent economy was hammered by the one-two punch of COVID-19 and soaring food and energy prices, leaving it short of dollars and struggling to pay rising debts.

Cairo secured a new $3 billion IMF package in December by committing to a flexible currency, a greater role for the private sector and a range of monetary and fiscal reforms.

Import and currency restrictions have weighed on economic activity, and a foreign currency shortage continues despite three sizable devaluations since March 2022 that halved the value of the pound. Inflation stands now at a more than five-year high above 30%.

Ghana

Ghana is in its worst economic crisis in a generation, spending over 40% of government revenues on debt payments last year. In January, it became the fourth country to seek a rework under the Common Framework.

The West African country secured a $3 billion agreement with the IMF in December, though it still needs to get financing assurances from bilateral lenders to clinch the final sign-off.

The cocoa, gold and oil producer has already reached a deal to write down domestic debt and last week kicked off formal debt talks with international bondholders.

Malawi

Malawi is grappling with foreign exchange shortages and a budget deficit of some 1.32 trillion Malawian kwacha ($1.30 billion), or 8.7% of GDP.

The donor-dependent southern African nation is trying to restructure its debt in order to secure more funding from the IMF, which approved emergency funds in November.

Tunisia

The tourism-dependant North African economy is in the throes of a punishing crisis that led to a shortage of basic food items.

A $1.9 billion IMF loan has been stalled for months as Tunisia’s president has shown little sign of action on key reforms. Most debt is internal but foreign loan repayments are due later this year. Credit ratings agencies have said Tunisia may default.

Zambia

The first African country to default during the COVID-19 era in 2020, Zambia is seen as a litmus test for the G20’s Common Framework initiative set up during the pandemic to streamline debt restructurings. But talks have been remarkably slow, and external debt crept up to $18.6 billion.

Western officials have blamed China, its largest bilateral lender, for the hold-up, something that China disputes. There have been broad disagreements about how much debt the country can afford going forward.

Zambia’s currency, the kwacha, has fallen more than 10% against the U.S. dollar this year, which the central bank has said is adding to inflation. It blamed the drop partly on debt restructuring delays.

Source: VOA