Covid-19 aggravates Sub-Saharan African debt problems

Økonomisk forskning

  • Angola,
  • Kenya,
  • Sør Afrika
  • Generell økonomisk

12 oktober 2020

Due to the Covid-19 pandemic many countries in Sub-Saharan Africa faced severe downturns this year, resulting in an unprecedented regional economic contraction.

Although a health crisis has been averted, it is the domestic and international measures implemented to contain the pandemic that have had a large impact on economies and societies. For some of them, the economic progress made in the past decade has been lost. Many countries, particularly those that are highly indebted, lack the room to support their economies through fiscal stimulus packages similar to those in many developed economies. Therefore, a recovery is likely to be slow for these African countries. The pace and shape of the recovery will depend on how their economies were faring before the crisis and on the structure of their economy.

Key points

  • A health crisis has been averted, but at a large economic cost. The region is facing a severe recession this year. Most affected countries are those dependent on tourism, oil exports and volatile financial flows. Countries that have elevated debt levels are especially vulnerable.
  • The Covid-19 pandemic is aggravating the debt problems for some countries. The elevated debt levels and the widening fiscal deficits limit the room for governments to support their economies and implement the large fiscal stimulus packages seen in advanced economies.
  • Substantial financial support from multilateral financial institutions like the IMF and the World Bank will help African countries to mitigate the negative impact on their economies and societies. 
  • Economic recovery will be slow due to existing vulnerabilities and the limited room to support the economies. The rebound is also surrounded by an unusual high level of uncertainty.  
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