Analysis-Debt squeeze leaves sub-Saharan Africa's governments in fiscal bind
By Rachel Savage
MARRAKECH, Morocco (Reuters) — The International Monetary Fund (IMF) urged sub-Saharan African policymakers last week to cut costly fuel subsidies and raise more in taxes, measures that may be hard to implement as governments grapple with tough spending choices amid high debt.
The region has been hit by repeated economic shocks since 2020, from the COVID-19 pandemic to Russia's invasion of Ukraine and rising U.S. interest rates, putting cash-strapped, debt-laden governments in a political and fiscal bind.
However, the IMF's prescriptions, set out at its annual meetings last week, are often painful to administer. Countries from Ghana, which defaulted on its debts last year, to Kenya, which must pay back or refinance a $2 billion international bond before next June, have seen violent protests against tax hikes and subsidy removals.
Meanwhile, the region's debt-to-GDP ratio, which has already doubled to 60% in the last decade, could rise 10 percentage points in the next five years if its fiscal trajectory doesn't change, according to a recent International Monetary Fund (IMF) report.
«We're doing our utmost to avoid this being a period of… spending on health and education being harmed,» Abebe Selassie, the IMF's African department director, told Reuters in an interview.
«The danger that I see, if the financing squeeze persists, is exactly that that would happen.»
HARD CHOICES
Many African governments are having to slash spending when the continent's booming population and climate change mean that demand for public money is growing.
Earlier this month, Kenya's cabinet ordered government departments and ministries to cut 10% from their operational budgets for the fiscal year ending in June 2024.
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