ACCRA - Sub-Saharan African nations are at growing risk of debt distress because of heavy borrowing and gaping deficits, despite an overall uptick in economic growth, the International Monetary Fund warned on Tuesday.
The sober assessment comes as African countries continue to tap international debt markets and issue record levels of debt in foreign currencies, spurred on by insatiable investor demand for yields.
In its economic outlook for the region released in Accra Ghana, the Fund projected the rate of economic expansion would rise to 3.4 percent this year, up from 2.8 percent in 2017, boosted by global growth and higher commodity prices.
Slower growth in South Africa and Nigeria - the continent’s two largest economies - weighed on the region-wide average, but the IMF expects growth to pick up in around two-thirds of African nations. However, under current policies, that rate is expected to plateau below 4 percent over the medium term.
Meanwhile, around 40 percent of low-income countries in the region are now in debt distress or at high risk of it, the IMF said. And refinancing that debt could soon become more costly.