The problem of foreign debt has been a major and persistent set back for the African economy; despite being one of the fastest growing economy in the entire globe. This is mainly as a result of the fact that most African countries in debt are still underdeveloped and therefore depend on foreign loans to sustain their economies. As the domestic resources in these countries are limited to meet these needs, countries often have to borrow and continuously accumulate debt, and the level of debts which stems from these countries’ continuous borrowing has continued to rise unabated. Consequently, governments in low-income countries often face considerable economic deficits, given their high levels of indebtedness in relation to GDP and to export receipts.
It is important to point out that the debt we are referring to in this context is the one we call foreign or external debt, which is the total debt owed by both public and private bodies to nonresidents of a country, which are payable in an internationally accepted foreign currency, goods or services. You may have heard about this issue of foreign debt, but you may not know how bad it is. See the 10 African countries with the highest external debts, and know if your country made the blacklist; that is, if you’re African.
Read on to see the details and the rest of the indebted African countries…No.1 is incredible!
Nigeria’s external debt stock as at the second quarter of 2015 stood at about $10.3 billion, over 10% increase, against the $9.5bn recorded in the first quarter of the year, just as the Federal Government revenue rose to N485.95 billion from the N324.7 billion recorded in May. This disclosed that Nigeria’s external debt profile has risen to $11 billion. The debt has continued to rise and according to the Director-General, Debt Management Office, Dr. Abraham Nwankwo, Nigeria presently owes about $11 billion externally.
The United Republic of Tanzania is the second largest economy in the East African Community and the twelfth largest in Africa. The country’s revenue is largely sourced from agriculture which we know is often subject to failure. As at September, 2014, Tanzania’s external debt stood at $13.7 billion. And according to various sources, the debt was steadily increasing, and was close to Tsh28 trillion by January this year – a trend which is predicted to continue in the coming two years: The Oxford Economics forecast projects an increase of the external debt to the extent of 25 per cent, and reaching US$17 billion by the end of 2015! This is largely due to increased Government borrowing, with revenue collections wildly fluctuating.
Ghana, whose main exports are gold and oil, has seen its foreign debt ratio more than double to 38% since 2006, the year before it sold the first of its $2.75 billion of Eurobonds. The fall of the Cedi against the dollar has also drastically affected the economy of Ghana of late. Together with some other African currencies, the Ghanaian cedi weakened more than 15% against the dollar this year. While external debt stood at US$13 billion 36.6% of GDP (which is total value of goods and services) at the end of 2014, up from US$11.5 billion 26.9% of GDP recorded in 2013. The total of both domestic and external debt leaves Ghana with a total debt stock of $76.1 billion which is 67.1% of last year’s GDP.
According to the Bank of Ghana, the country’s external debt stock has also increased by GHc4.8 billion between May and June and currently stands at GHc58.6 billion representing 44% of the GDP. Ghana’s total debt stock as at the end of March 2015 was GH¢88.2 billion, the Bank of Ghana has said that ‘Of the total public debt, domestic debt constituted 41.4 per cent and external debt 58.6 per cent’.
Ethiopia’s general debt analysis has not been favorable, especially because the external debt has not been equaled by a dynamic and diversified export sector. Despite the present encouraging economic growth in the country, public enterprises have continued to borrow heavily to fund their advanced investment plans. Consequently, their financing needs increased to 7.4 percent of GDP, while public and publicly-guaranteed debt reached an estimated 50 percent of GDP in June 2015. At the moment, Ethiopia’s foreign debt is hitting a whopping $14 billion.
The Angolan government and economy are still recovering from the Angolan Civil War that plagued the country from independence in 1975 until 2002. Despite extensive oil and gas resources, diamonds, hydroelectric potential, and rich agricultural land, Angola remains poor, and a third of the population relies on subsistence agriculture.
Presently, Angola, which is Africa’s second-largest oil producer, is struggling to cope with crude prices that have slid more than 40 percent over the past year. Angola’s foreign debt was estimated to be $22.71 billion as at 31 December 2013. Just last week it was revealed that the public debt of Angola will reach a whopping 57.4 percent of the nation’s GDP by the end of 2015.
Tunisia’s economic growth historically has depended on oil, phosphates, agri-food products, car parts manufacturing, and tourism. In the World Economic Forum 2008/2009 Global Competitiveness Report, the country ranks first in Africa and 36th globally for economic competitiveness. All the same, just like many other African economies, it is still heavily plagued by debts as a result of incessant loans and borrowings from foreign countries. As at 31 December 2013, Tunisia’s debt stood at a colossal estimate of $26.95 billion. Although the government has been fighting tooth and nail, employing various strategies to end the country’s shaming history of heavy indebtedness, the debt rate continues to rise, putting the country under severe financial pressure. As at April 2015, the country’s Prime Minister, Habib Essid stated that Tunisia’s debt ratio has reached 53% of her Gross Domestic Product.
Morocco’s external debt rose by 18.3% to stand at 277.7 billion dirhams in 2014 compared to 234.7 billion dirhams in 2013, Economy and Finance Ministry said. With this increase, external debt equaled 30.3% of GDP in 2014 against 26.9% in 2013, the same source said. The same source noted a 31.8 billion dirham increase in external debt of public institutions and enterprises and an 11.2 billion hike in treasury debt. The treasury accounted for 50.8% of the total external public debt followed by public institutions with 48.9% while the share of banks and local collectives was limited at 0.3%.
Sudan has broad strips of poverty and glaring inequality between regions. According to the 2009 National Baseline Household Survey, the average rate of poverty incidence is at 46.5%, indicating that some 15 million people in the country are poor. For this reason and some other factors, Sudan remains a highly indebted country that has accumulated considerable external arrears and has been in non-accrual status with the World Bank Group (WBG) since 1994. At the end of 2013, Sudan’s external debt stock stood at $45.1 billion in nominal terms, about 85% of which was in arrears.
Egypt’s economy has been hit hard by the political turmoil which gripped the country since a popular uprising toppled former President Hosni Mubarak in January 2011. Foreign exchange reserves have fallen by more than half, since 2011 when they were valued at $36 billion before the uprising. Amid the continued pressures on foreign reserves, Egypt has had to depreciate its currency twice this year and investment banks expect further devaluing before the end of 2015.
By March 2015, Egypt’s domestic debt had soared to EGP 2.016 trillion. Total debt was valued at EGP 1.9 trillion in December 2014. Egypt’s external debt however, continued to rise still, and according to September’s central bank bulletin, by 30 June 2015 it has risen by 4.3 percent, reaching $48 billion compared to $46 billion a year before and generally exceeding the nation’s debt levels in the early 1990’s!
1. South Africa
According to the World Fact Book, as at 31 December 2014, South Africa was running an estimated debt of $143billion. South Africa’s debt is so outrageous that virtually all residents, both citizens and non-citizens are “guilty of the debt crime”: The government, private investors, down to the ordinary salary earners and consumers. The details and dept of South Africa’s debt cannot be exhausted here. However, I’ll try to point out the most significant facts below:
- Statistics compiled by a debt management firm, Debt Rescue show that South African consumers owe the bulk of their monthly salaries to creditors, (as much as 75%).
- According to the FinScope South Africa 2013 financial survey, about five million South Africans are battling with over-indebtedness. That is almost 14% of the total number of South Africans older than 16.
- According to a report issued by the World Bank, Cape Town residents of South Africa were the biggest borrowers in the world in 2014. In addition, 86% of South Africans borrowed money in 2014, buttressing the fact that they are the top borrowers in the globe.
- External Debt in South Africa averaged $85603.45 Million from 2002 until 2015, reaching an all time high of $145082 Million in the fourth quarter of 2014.
- In the last five years, South Africa’s debt-to-GDP ratio grew at a rapid rate of almost 70%: from 26% in 2009 to a level of 43.9% by 2014.