Editor’s Note: January 10, 2019

Africa must not get complacent about its debt

Uganda’s finance ministry has dismissed warnings from both the central bank and the government’s auditor about rising debt, saying the country will continue to borrow ‘cautiously and selectively’.

The country is among a growing list on the continent facing questions about debt sustainability, following a borrowing binge in recent years to fund ambitious industrialization and infrastructure projects.

According to the IMF at least 15 African countries are at risk of, or in debt distress.

Many are flocking back to the lender amid deteriorating public finances, while issuing sovereign bonds at record levels against the backdrop of rising interest rates in developed markets.

According to the Jubilee Debt Campaign average yields on African sovereign debt rose 2.5% in 2018 to 8.6%.

Despite this there is a creeping sense of complacency on the issue. 

Too much attention in recent months has gone to largely unfounded and misleading claims that borrowing from China is to blame for Africa’s debt problem.

Uganda’s head in the sand approach is also reflective of efforts to downplay the significance of rising debt. Last month Kenya dismissed IMF warnings on its borrowing, which has hit almost 60% of GDP.

This is partly to reassure markets, but Africa must take care not get complacent about its debt. 

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