By Adedapo Adesanya
The World Bank has expressed worry over the rising external borrowing costs of Nigeria and other African countries, especially those in sub-Saharan Africa (SSA), noting that in the last 12 years, the region has used about 16.5 per cent of revenue to service debts as against 5 per cent in 2010.
In a press release titled African Governments Urgently Need to Restore Macro-Economic Stability and Protect the Poor in a Context of Slow Growth, High Inflation, the global lender said, “Debt is projected to stay elevated at 58.6 per cent of GDP in 2022 in SSA.
“African governments spent 16.5 per cent of their revenues servicing external debt in 2021, up from less than 5 per cent in 2010. Eight out of 38 IDA-eligible countries in the region are in debt distress, and 14 are at high risk of joining them.
“At the same time, high commercial borrowing costs make it difficult for countries to borrow on national and international markets while tightening global financial conditions are weakening currencies and increasing African countries’ external borrowing costs,” it stated.
According to the bank, it is crucial to increase the effectiveness of current resources and to maximize taxes in light of the current difficult situation.
The biannual analysis of the near-term regional macroeconomic outlook showed that economic growth in Sub-Saharan Africa (SSA) is set to decelerate from 4.1 per cent in 2021 to 3.3 per cent in 2022, a downward revision of 0.3 per cent.
This is mainly due to the slowdown in global growth, including flagging demand from China for commodities produced in Africa.
Due to decreased corporate investments and consumer consumption, the war in Ukraine is impacting on economic activity and aggravating already high inflation.
The report that 29 of the 33 SSA nations having information as of July 2022 had inflation rates exceeding 5 per cent, while 17 nations experienced double-digit inflation.
The bank said, “Global headwinds are slowing Africa’s economic growth as countries continue to contend with rising inflation, hindering progress on poverty reduction. The risk of stagflation comes at a time when high-interest rates and debt are forcing African governments to make difficult choices as they try to protect people’s jobs, purchasing power, and development gains.”
Due to recent economic shocks, instability, and war, and extreme weather, hunger has drastically grown throughout SSA.
The World Bank spoke about the growing debt to GDP ratio, particularly in the high inflationary environment.
