Sub-Saharan economies in debt distress: IMF

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John Mangundya

Conrad Mwanawashe
The number of low-income countries in debt distress or facing high risk of debt distress in sub-Saharan Africa increased to 12 in 2016 from seven in 2013 driven mainly by widening fiscal deficits, slow growth and slump in commodity prices, according to the International Monetary Fund.
The IMF said in its latest Regional Economic Outlook for sub-Saharan Africa that public debt as a share of GDP was now over 50 percent of GDP in close to half of the region’s economies.

“Elevated public debt levels raise concerns about debt sustainability in the region while spiraling banks-sovereign nexus further strain the financial sector,” the IMF report said.
The Regional Economic Outlook, under the theme Fiscal Adjustment and Economic Diversification, said that many of faster growing economies continue to be driven by public spending with debt levels and debt service costs rising.

This comes as Zimbabwe’s debt, most of which is external, at over $10 billion including penalties has reached 78 percent of GDP, according to Dr Jesimen Chipika, RBZ Deputy Governor who was one of the discussants at the presentation of the report.

Reserve Bank of Zimbabwe governor Dr John Mangudya concurred with the report saying the rising debt levels in the region were worrisome moreso in Zimbabwe’s case as its isolation economically and financially, had made it difficult for the country to secure patient capital.

“This economy requires patient capital to be able to grow and that requires funding. And for us to get the funding we need to minimise country risk. Minimising country risk means that we need to continue to reengage with all the effort. So we need to continue to work with the Fund and the rest of the IFIs in this quest for seeking for patient capital which is missing in Zimbabwe,” said Dr Mangudya.

Dr Mangudya, said Zimbabwe was committed to the roadmap agreed with the IMF and other International Financial Institutions such as the World Bank and the African Development Bank in Lima, Peru in 2015 in its quest to resolve the country’s debt overhang.

“Our relationship with the Fund remains cordial as you know that they have an office here in Zimbabwe.

“We have also since paid our obligations to the IMF (and) what is now left is to work on the reengagement with the World Bank and AfDB so that at the end of the day we finalise what we agreed with (these) development partners and IFIs in Lima,” said Dr Mangudya.

“We are still on the roadmap to satisfy our commitments and declarations that we made in Lima in 2015. We remain resolute in those areas. It might be timing but the objective remains the same to ensure Zimbabwe integrates within the world economy.

“It is our intention to continue therefore to work with the Fund especially in our quest to resolve the country’s debt problem,” he added.

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