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Fitch: Sub-Sahara African debt burdens rising faster than elsewhere

Published 30/06/2020, 13:25
Updated 30/06/2020, 13:30

LONDON, June 30 (Reuters) - Government debt burdens across
sub-Saharan Africa are rising at a faster pace and to higher
levels than elsewhere in emerging markets, heightening the risk
of further rating downgrades and defaults, ratings agency Fitch
warned on Tuesday.
Emerging markets have been battered by the fallout from the
coronavirus pandemic, with a coinciding oil price rout adding to
the pain for smaller and often riskier developing countries,
many focussed on crude exports and having few fiscal or monetary
buffers.
Fitch predicted that the median of government debt-to-GDP
for the 19 sovereigns it rated in the region would rise to 71%
by end-2020 from 26% in 2012, while the median debt ratio across
other emerging markets is expected to climb to 57%.
Africa's main oil exporters – Angola, the Republic of Congo,
Gabon and Nigeria – have been hit particularly hard given their
high reliance on oil revenues for fiscal and external financing,
and the dependence of the rest of their economies on crude
earnings.
Countries with a concentration on tourism, particularly Cabo
Verde and the Seychelles, have also been badly affected, Fitch
said.
While Mozambique and Republic of Congo already defaulted
recently, ratings pointed to more stress ahead, with Zambia at
'CC' and Gabon, Mozambique and Republic of Congo 'CCC'.
Another 13 sovereigns were in the single 'B' range, with
seven sovereigns having a 'negative' outlook on their rating.
"The coronavirus shock compounds a marked deterioration in
SSA public finances that has been running for a decade and which
will be challenging to reverse," Ed Parker, managing director
sovereign ratings EMEA, wrote in a report.
"Further sovereign defaults are probable," he added.
While emergency support from the International Monetary Fund
and the G20 Debt Service Suspension Initiative (DSSI) provided
useful fiscal and external financing, those programmes were
"moderate in size" at around 0.9% and 1.2% of GDP respectively,
Parker said.
They were not designed to address debt stocks and
medium-term risks to debt sustainability, he added.

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