Developing countries facing a debt crunch
Reuters, London :
High interest rates, growing investor risk aversion and borrowing that ballooned in recent years have left a range of developing economies mired in debt crises.
Helping them claw out of this will be a key agenda item at the annual IMF and World Bank meetings in Morocco’s tourist hub of Marrakech which kicks off next week.
Below is a look at countries facing debt troubles, listed in alphabetical order.
North Africa’s largest economy needs to repay some $100 billion of hard-currency debt over the next five years.
Cairo currently spends over 40 percent of revenues on interest payments; financing needs for fiscal 2023/204 stand at $24 billion.
Egypt has a $3 billion IMF programme and has devalued the pound by roughly 50 percent since February 2022.
But a $2 billion privatisation plan has been slow, and it has delayed the removal of electricity subsidies.
Elections, scheduled for December, lower the chances of painful reforms, analysts said, and support from wealthy Gulf nations is key to ensuring financing needs are met.
The Covid-19 pandemic hammered Ethiopia’s economy, and a two-year civil war from November 2020 heightened the pain with the country losing duty-free access to the US amid rights abuse allegations.
Ethiopia requested a restructuring in early 2021 under the G20 Common Framework – set up during the pandemic to try to streamline debt overhauls.
In August, China allowed partial debt payment suspension. Last month ratings agency Moody’s changed Ethiopia’s outlook to stable from negative on expectations of quick progress through the Common Framework.
Ghana defaulted on most external debt in late 2022 amidst its worst economic crisis in a generation, becoming the fourth country to seek a rework under the Common Framework.
Its progress in restructuring both domestic debt and $30 billion in external debt has been fairly swift and it secured a $3 billion IMF bailout in May.
Ghana’s finance minister has said he expects to reach a deal with international bondholders by year-end.
Still, protesters have taken to the streets of Accra recently over rising living costs, unemployment and economic hardship.
The East African nation’s public debt stood at 67.4 percent of GDP at the end of 2022, according to the World Bank, putting it at high risk of debt distress.
President William Ruto’s government has moderated spending and proposed a raft of tax hikes, assuaging some concerns over imminent default.
But surging oil prices have boosted inflation, and the currency has lost more than 16 percent against the dollar this year, casting doubt on his ability to press on with reforms.
Kenya, which has to repay a $2 billion eurobond next year, is in talks with both the African Development Bank and the World Bank for budgetary support.
