The average debt ratio in sub-Saharan Africa has almost doubled in just a decade from 30% of GDP at the end of 2013 to almost 60% of GDP by end of last year, the IMF said in a new report.
Africa's ratio of interest payments to revenue has more than doubled since the early 2010s and is now close to four times the ratio in advanced economies, the report released this week said.
The ratio is a key metric to assess debt servicing capacity and predict the risk of a fiscal crisis, said the report titled How to Avoid a Debt Crisis in Sub-Saharan Africa.
"Repaying this debt has also become much costlier," the report authored by IMF experts said.
"As of 2022, more than half of the low-income countries in sub-Saharan Africa were assessed by the IMF to be at high risk or already in debt distress."
These trends have sparked concerns of a looming debt crisis in Africa, it said.
Zambia was the first African country to default on its debt in 2020, followed by Ghana late last year. Others, such as Kenya, have seen their debt sustainability indices worsen over time.
Kenya's President William Ruto called for debt restructuring last week at the UN General Assembly in New York.
He said a new "debt architecture" was needed, one that would extend the tenor of sovereign debt and provide a 10-year grace period for countries in debt distress.
The IMF paper offers possible solutions to prevent this distress from happening, while also achieving the region’s development goals.
One of these is mobilizing domestic revenue, which is less detrimental to growth in countries where initial tax levels are low, it said.
The IMF analysis also shows that most countries in the region will need to reduce their fiscal deficits in the coming years. For the average country, the amount of adjustment is about 2 to 3% of GDP.
(Editing by Seban Scaria email@example.com)