AG IMF and World Bank : possible solutions for African debt

Should we simply cancel the African debt or is there a need for profound restructuring? The question concerns as much as it divides. If several African heads of state have pleaded for pure and simple cancellation, on the side of the Bretton Woods institutions the position is quite different. The general meetings of the International Monetary Fund (IMF) and the World Bank were an opportunity to put the issue back on the table.

It must be said that the issue has become more than worrying. According to the IMF, for example, in 2022, public debt in sub-Saharan Africa reached 56% of GDP.

Worse, according to an IMF document, the average debt ratio in sub-Saharan Africa has almost doubled in just ten years, going from 30% of GDP at the end of 2013 to just under 60% of GDP at the end of 2022. The cost of repaying this debt has also increased.

The interest payment/revenue ratio has more than doubled since the early 2010s and now represents nearly four times that recorded in advanced countries. In 2022, more than
half of low-income countries in sub-Saharan Africa were at high risk of debt distress or were in debt distress according to IMF assessments.

Despite everything, the choice for African heads of state, at least for the majority, suspension remains the best solution. Macky Sall, President of the Republic of Senegal then president of the African Union, pleaded for the suspension of the debt. For him, estimated at 365 billion dollars, African debt represents ‘only’ 2% of world debt.

80 billion dollars between 2020 and now

At the center of discussions during general meetings, the question concerns the IMF. According to Jihad Azour, IMF director for the Middle East and Central Asia, between 2020 and today, the Fund has provided approximately $80 billion through programs, emergency financing and SDR allocations. In the same vein, six countries also benefited from agreements approved under the newly launched Resilience and Sustainability Facility.

But the figures remain worrying. According to a recent World Bank r
eport, 22 African countries are at high risk of debt distress or have already reached it, such as Ghana, Zambia, Malawi and Chad.

‘There is a debt sustainability problem’

So with all these elements should we cancel? Abebe Aemro Selassie, director of the IMF’s Africa department, admits that the figures suggest there is a debt sustainability problem. ‘This is when debt restructuring issues need to be discussed. And that’s when we start these kinds of discussions. So I’m not sure there is a comprehensive debt cancellation solution. This is why I think it is necessary to focus on each country, look at the numbers and try to deal with them,’ he analyzed.

Source: Africa News Agency