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African indebtedness is critical but still reversible

Tuesday, August 13, 2019

Subject

African debt crisis?

Significance

Two decades after large-scale debt cancellation began in Sub-Saharan Africa, around one-third of the region’s countries have returned to, or are at imminent risk of, debt distress, according to the IMF. This has increased concerns of a repeat of a 1980s-style debt crisis, which ushered in the region’s fabled ‘lost decade’.

Impacts

  • The Republic of the Congo's prospects of restructuring its commercial debts have increased after its recent bailout agreement with the IMF.
  • A speedy resolution to Mozambique’s debt crisis is unlikely after a recent domestic court ruling against its Eurobond-related debt.
  • The recent fall in external borrowing reflects tightened market conditions more than reduced debt appetite, and may reverse in better times.

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