LONDON, April 3 (Reuters) - Zambia has become the latest
African country looking for help to tackle its hefty debt burden
this week as international lenders and analysts are warning the
pandemic crisis could push many of the continent's economies
into debt distress.
Below are four charts to show some economic and fiscal
pressures faced by a number of African countries.
1/ RISING BORROWING COSTS
The premium demanded by investors to hold African
hard-currency bonds has soared in recent weeks, indicating that
borrowing costs have risen to painfully high levels for many
governments on the continent. This means that African sovereigns
- unlike their Western peers - have little space to provide
stimulus at a time of waning growth and with the economic
fallout from the COVID-19 pandemic not yet foreseeable.
Sovereign spreads of various African debt issues over
safe-haven U.S. Treasuries has risen to fresh record or
multi-year highs for countries such as Angola, Gabon and Ghana
with all of them trading above the 1,000 mark, seen as an
indicator of debt entering distress territory. The Africa
composite reading also entered that territory for the first time
in late March.
2/ RISING DEBT LEVELS
Rock-bottom global borrowing costs in recent years have
fuelled a debt issuing bonanza across many emerging markets with
governments across Africa - from oil-rich Nigeria to smaller,
fast-growing economies such as Ethiopia - joining in. The rising
debt burden has seen a steady increase in the ratio of debt-to
GDP across many counties, with some - such as copper producer
Zambia - finding themselves laden with an unsustainable debt
burden that might become too painful to service at a time when
funds are needed to shore up fragile healthcare systems. In just
two years from 2015 to 2017, African external debt payments
doubled from an average of 5.9% of government revenue to 11.8%.
3/ SHRINKING REVENUES
Many African economies are still heavily reliant on
commodities and oil production as their main source of hard
currency revenue. But falling commodity prices as fears of a
global recession are roiling markets and an oil price shock that
has seen crude prices tumble 70% from their January high to
below $20 per barrel in March is bound to take a hefty toll on
government revenues. Oil prices have spent much of the recent
weeks at levels well below what African producers need to fund
their budgets and maintain their reserves.
4/ FX RESERVES UNDER PRESSURE
Ultimately, much hinges on the amount of foreign currency
reserves a central bank has at its disposal to ensure needed
imports are secure or help shore up battered currencies. But
many countries on the continent lack much of that firepower,
with central bank reserves in countries such as Angola and
Zambia having been on a broad downward trend in recent months
and years, the latter having reached painfully low levels.
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Africa EMBI spreads https://reut.rs/2UCLPoa
Debt ratios for Africa oil and commodity producers https://reut.rs/3bM7kIS
Oil breakeven price https://reut.rs/39B9Tff
Africa FX reserves under pressure https://reut.rs/39GzPGg
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