The International Monetary Fund (IMF) said there are five key decisions African leaders must take to avoid a debt crisis, as they attain high-risk status.
The International Monetary Fund has made some recommendations on policy actions African leaders must take to avoid a debt crisis, as they attain high-risk status.said the average debt ratio in the region has almost doubled in 10 years.
“The region’s ratio of interest payments to revenue, a key metric to assess debt servicing capacity and predict the risk of a fiscal crisis, has more than doubled since the early 2010s and is now close to four times the ratio in advanced economies,” the IMF said.In the report, the IMF said more than half of the low-income countries on the continent are at high risk or already in debt distress as at the end of last year.
“In most sub-Saharan African countries, fiscal policy focuses excessively on short-term goals and is not guided by a clear medium-term strategy. This lack of anchoring has resulted in frequent breaches of fiscal rules and ever-increasing public debt levels,” the firm wrote in its report. “The paper suggests a novel approach to estimating country-specific medium-term debt anchors, which ensures that debt service costs remain manageable.”Listing other solutions, the IMF told African governments to undertake fiscal adjustment to bring debt back to a safer level, strengthen budget institutions to improve the implementation of fiscal plans and get people on board while anticipating public resistance to reforms.
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