Sub-Saharan Africa is sinking into debt, international agency Fitch Ratings has warned.
Across East Africa, economists are already warning that the growing debt levels could push regional economies into financial distress.
Kenya leads other EAC member states in debt accumulation, followed by Tanzania, Rwanda and Uganda.
Kenya plans to borrow $600 million from foreign lenders in the 2016/2017 fiscal year to finance its development budget and partly bridge its fiscal deficit, projected at $5.38 billion in the current financial year.
Kenya’s share of public debt as a proportion of GDP increased from 41.7 per cent in 2012 to 55.4 per cent in 2016, while that of Tanzania grew from 29.2 per cent to 42.4 per cent in the same period. Rwanda’s stood at 41.5 per cent from 20.1 per cent and Uganda’s grew to 37.9 per cent from 24.2 per cent during the period under review.
In its latest assessment titled Sub-Saharan Sovereign Debt Rises, Hampers Consolidation, Fitch Ratings says the increase, attributed to dwindling tax collections and massive borrowing by governments to fund infrastructure projects, is exerting pressure on the economies of the region.
“While debt-funded infrastructure investment will help remove constraints on long-term growth, its benefits may not fully materialise until governance and business environments improve. As such, its near-term impact on sovereign debt ratios will be negative,” said Fitch.
Massive external borrowing has seen the public debt to GDP ratio in sub Saharan Africa increase from 30.2 per cent in 2011 to 49.7 per cent in 2015.
The debt-GDP ratios in the region are projected to continue rising to 51.4 per cent this year, and 53.3 per cent in 2017.
Considering that the ratio in the region had fallen from 80 per cent to 30 per cent between 2000 and 2011 due to debt forgiveness and restructuring by the World Bank and the International Monetary Fund, the new wave of indebtedness is raising a red flag on the ability of most countries to service their loans.