A new report by Bloomberg has revealed that, out of the top 10 countries globally with the most significant debt distress, 5 are in Africa.
The 5 countries include:
- Tunisia
- Ghana
- Egypt
- Kenya
- Namibia
According to the analysis, the above countries have accrued a significant proportion of debt principal and interest repayments that are due between July 2022 and October 2023.
You can also see that these countries are characterized by growing yield values as well as rising value of interest repayments.
The image below is a further graphical analysis from the analysis:
According to the report, these countries are part of several developing and/or emerging countries across the world whose sovereign debt has yields that are 10% greater than the average yield for similar types of debt in the market.
The 19 nations that are now in that situation account for more than $237 billion that is owed to foreign bond holders across the world, and they are at risk of collapse with the analysis pointing out about their lower foreign reserves and external balance sheets which developed borrowers can turn to in case of default.
With inflation rising all across the world, the analysis has determined that the at-risk countries are struggling to afford repayments in debt that is usually denominated in dollars, euros, pounds. Business people in some of these countries are reportedly increasingly finding it difficult to get dollars to sustain their activities due to inflation and decline in exports.
In particular:
- Ghana
- Tunisia, and
- Egypt
have been singled out as ‘vulnerable to default.’
The analysis points out the occurrence of ’bouts of political turmoil’ and internal economic challenges that would see these countries prioritize internal spending to cushion their citizens – a situation that adds to the risk of default.
In the list, you can see that the African countries have some of the highest debt-to-GDP ratios with Egypt’s debt almost at parity with its GDP:
- Egypt – 94%
- Tunisia – 87.3%
- Ghana – 84.6%
- Kenya – 70.3%
- Namibia – 69.6%
The analysis further raises concerns about the debt situation in the developing world since the International Monetary Fund has also indicated that 30% of emerging and developing countries are at or near debt distress, with 60% from developing economies.
Several of these countries are at risk after reaching to foreign financial markets as they sought financing to mitigate the effects from the Covid-19 Pandemic.
