The World Bank Group has predicted a positive trend for African countries, noting that their public debt will drop in 2024.
Low-income African countries have been stuck in a loop of debt servicing instead of channelling funds to national development. The World Bank thinks 2024 could be a positive year for public debt in Africa.
According to the latest World Bank report entitled, Tackling Inequality is Necessary for Growth and Poverty Reduction the global financier argued that just like the continent’s economic growth, Africa’s public debt status is on the cusp of a positive trend.
The World Bank further explained that more than half of African countries suffer unsustainable debt burdens, and financial issues and are actively trying to restructure debts.
African governments of such countries heavily rely on market financing and non-Paris club loans which directly increase their public debt service.
The World Bank noted that Sub-Saharan Africa (SSA)’s national debt has tripled since 2019 due to increased domestic and external debt levels. Sub-Saharan Africa’s median public debt-to-GDP ratio rose from 29% in 2012 to 53% in 2019 before the COVID-19 pandemic disrupted things.
“Sub-Saharan Africa’s debt service levels have steadily increased since 2012, adversely affecting fiscal space and increasing vulnerability to shocks, especially for countries that have gained access to the international bond market and other non-concessional financing sources. Total debt service increased by US$46.6 billion between 2012 and 2022,” as seen in the World Bank’s report.
However, the World Bank stated in its latest report that public debt in Africa will drop in 2024 kickstarting a positive trend for Africa in this sector.
The World Bank believes the public debt will drop significantly in 2024 but despite the drop the risk of debt challenges remains high in the continent.
“Public debt in Sub-Saharan Africa is expected to decline from 61 percent of GDP in 2023 to 57 percent of GDP in 2024. However, the risk of debt distress remains high,” the report reads.
The World Bank plays a critical role in Africa by fulfilling its obligation of fighting poverty by financing developing economies to improve the standard of living of its citizens.
What to know
- Other takeaways from the World Bank report include the positive rebound in the economies of countries in the SSA region driven by a cooling-off of inflation. The median inflation in the region is projected to fall from 7.1% in 2023 to 5.1% in 2024 and 5 percent in 2025–2026. Despite this fact, inflation remains high in the region.
- The Sub-Saharan region requires an urgent and critical look in the areas of revitalizing growth and spearheading economic expansion. Growth per capita in SSA is set to accelerate from a modest 0.1% in 2023 to 0.9% in 2024 and 1.3% in 2025. However, the projected boost in economic activity remains well below the long-term growth rate revealing that the region has been stuck in a low growth trap for decades.
