The African Development Bank (AfDB) has stated that the risk of debt defaults is increasing among African countries.
At the Strategy for Economic Governance in Africa launched on Friday, AFDB stated that Africa’s “declining economic output as a result of containment measures against COVID-19 and policy measures to stimulate the economies have heightened debt vulnerabilities.”
“Public debt now exceeds 50% of GDP in nearly half of its regional member countries. Over the last decade, Africa increased its debt at a faster rate than any other region.
“The risk of defaults on debt, much of which is now non-concessional, has increased. At least 24 African countries have applied for the Paris Club–led Debt Service Suspension Initiative, which would free up resources to fight the pandemic.”
It recommended that “building the capacity for debt management becomes important, but there is also a need to revamp the nexus between growth, financing instruments, and effective governance.”
It was added that “Doing so would ensure that reforms adopted in the context of debt suspension or restructuring are properly timed and tailored towards giving credibility back to governments on their policy actions.”