Sub-Saharan African nations suffering from increasing public-debt levels and non-performing loans must take action to handle rising vulnerability, the International Monetary Fund (IMF) said.

About 40% of low-income countries in the neighborhood now are assessed as with debt distress or at heavy risk for this, the IMF said Tuesday. The median higher level of public debt exceeded 50% of gross domestic product by the end of not too long ago. Ratios deteriorated due to large primary deficits and interest bills, which happen to have almost doubled to 10% of revenue from about 5% in 2013, it said.

“Looking ahead, debt dynamics are inclined to fiscal slippages, subdued growth outcomes, exchange-rate depreciations and tighter financing conditions,” the Washington-based lender said within the regional economic outlook. The uptick in oil prices, impending elections and political transitions in numerous countries may reduce appetite for difficult reforms and could lead to further policy slippages.”

Mozambique and Republic of Congo missed Eurobond payments in 2017, while countries including Cameroon and Zambia agreed or began talks on bailouts with the IMF. Also, since Namibia and South Africa were downgraded to junk, sub-Saharan Africa has been left without the investment-grade foreign-currency issuers.

Loan Concern

Rising non-performing loans certainly are a threat to a economic recovery in the region in which the IMF forecasts gross domestic product will expand 3.4% in 2010, not as much as several.9% estimated for global growth.

Increases in non-performing loans are “particularly large” among resource-intensive countries which include Angola, Mozambique and Republic of Congo, where weak economic activity has resulted in a decline in credit quality. They’ve also grown in places like Zambia, where government arrears have continued to get a new banking sector, the IMF said.

“Safeguards to handle liquidity pressures inside the banking sector, enhanced writeup on asset quality and prompt recapitalisation of weaker banks should help preserve the banking sector’s capacity to give the non-public sector,” the financial institution said.

The IMF is additionally worried about a slowdown in private-sector credit development in 2017. After comprising inflation, such type of lending contracted in a good many countries plus nations which include Angola, Gabon and Zambia, it had become negative even so-called nominal terms, it said.

The deceleration of private-sector growth “poses a threat to recovery inside the affected countries, where fiscal space became constrained by way of the rising public debt burden,” the IMF said.

? 2018 Bloomberg

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