Trapped in binding agreements for loans they can ill afford with international investors, most African countries have kept their heads down and trimmed their spending. These days there are plenty of examples of sub-Saharan African countries – with the IMF’s endorsement – passing austerity budgets that discreetly tighten the screw on households and businesses with a mix of higher taxation and lower state spending to keep debt interest payments in check.
Namibia’s overarching aim is to stay off the IMF’s list. If last week’s budget – when the finance ministry forecast that its debt-to-GDP level of around 40% in 2017 would rise to almost 50% by 2021 – is anything to go by, it will struggle to achieve this. The IMF is worried because while 50% might not seem so high, given that countries like the UK have already exceeded 80%, Namibia pays 10% interest on its debt and the UK pays 1.8%. The multiplier effect pushes the African country into dangerous territory.
Namibia’s overarching aim is to stay off the IMF’s list. If last week’s budget – when the finance ministry forecast that its debt-to-GDP level of around 40% in 2017 would rise to almost 50% by 2021 – is anything to go by, it will struggle to achieve this. The IMF is worried because while 50% might not seem so high, given that countries like the UK have already exceeded 80%, Namibia pays 10% interest on its debt and the UK pays 1.8%. The multiplier effect pushes the African country into dangerous territory.
There are calls for Mozambique to be supported with a debt write-off following the devastation left by cyclone Idai.
According to the IMF, Mozambique is among six out of 35 low-income countries in the region that are in “debt distress” – in default and unable to service outstanding loans. A further nine are classified as at “high risk of debt distress” after their debt-to-GDP ratios exceeded 50%.
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