The Standard Bank Group has identified Ghana, Ethiopia, Zambia, Kenya and Angola as five countries that are in danger of experiencing “serious debt risk” in approximately two years. According to Bloomberg, Jibran Qureishi, the head of African research at Standard Bank Group, said that Ghana will most likely need an IMF bailout to regain investor trust.
“Debt sustainability now requires sharper focus,” Qureishi said.
Why these five companies may be in danger:
During the pandemic, Angola benefitted greatly from the G-20 nations’ Debt Service Suspension Initiative, which allowed the crude-rich country to postpone over $3 billion in payments last year. However, with an IMF programme coming to an end, uncertainty about future bilateral debt discussions, and inadequate oil industry investments that could limit output, Qureishi warned.
According to Standard Bank, Angola has the potential to receive a credit rating upgrade in 2022, provided things go smoothly.
Uganda’s economy is anticipated to grow now that the country’s government has abolished the onerous Covid-19 restrictions. According to Qureishi, massive oil investments and the construction of a pipeline will boost output and turn the landlocked East African nation into a key petroleum exporter.
Africa’s second-most populous country intends to reorganise borrowings under the G-20’s Common Framework, a move that is likely to stymie foreign credit and imply that IMF payments will only be restarted if progress is made, he said. He expressed alarm about the country’s low foreign-exchange reserves, which were last reported at $2.3 billion in May.
According to Standard Bank, East Africa’s largest economy has amassed debt, with a significant concentration of commercial loans, implying that servicing expenses currently account for 35% of foreign exchange reserves and 43% of tax revenue.
In 2020, Zambia became the continent’s first pandemic-era defaulter. It has since gotten staff approval for a $1.4 billion IMF loan, which is conditional on progress on debt restructuring under the Common Framework. Advances may be restricted, though, because China’s status as the country’s largest external creditor is unclear, according to Qureishi.