Government debt burdens across sub-Saharan Africa are rising at a faster pace and to higher levels than elsewhere in emerging markets, heightening the risk of further rating downgrades and defaults, the ratings agency Fitch warned on Tuesday.
Emerging markets have been battered by the fallout from the coronavirus pandemic, with a coinciding oil price rout adding to the pain for smaller and often riskier developing countries, many focused on crude exports and having few fiscal or monetary buffers.
Fitch said the median debt ratio across other emerging markets is expected to climb to 57%.
Africa’s main oil exporters – Angola, the Republic of Congo, Gabon and Nigeria – have been hit particularly hard, given their high reliance on oil revenues for fiscal and external financing, and the dependence of the rest of their economies on crude earnings.
Countries with a concentration on tourism, particularly Cape Verde and Seychelles, have also been badly affected, Fitch said.
While Mozambique and the Republic of Congo already defaulted recently, ratings pointed to more stress ahead, with Zambia at “CC” and Gabon, the Republic of Congo and Mozambique at “CCC”.
Another 13 sovereigns were in the single “B” range, with seven sovereigns having a “negative” outlook on their rating.
“The coronavirus shock compounds a marked deterioration in SSA public finances that has been running for a decade and which will be challenging to reverse,” Ed Parker, managing director in charge of sovereign ratings for Europe, the Middle East and Africa (EMEA), wrote in a report.
“Further sovereign defaults are probable,” he added.
While emergency support from the International Monetary Fund and the G20 Debt Service Suspension Initiative (DSSI) provide useful fiscal and external financing, these programmes are “moderate in size” at roughly 0.9% and 1.2% of GDP respectively, Parker said.
They were not designed to address debt stocks and medium-term risks to debt sustainability, he added.
