LONDON, UK
The aggregate external debt service burden for Fitch-rated sovereigns in Sub-Saharan Africa excluding South Africa (SSAx), will continue to rise over 2023-2025, says Fitch Ratings.
Debt service payments falling due will remain significantly higher than the average level seen in 2019-2021.
World Bank data, with adjustments by Fitch to expand the data set, indicate that total external debt service payments due next year among Fitch-rated SSAx sovereigns will reach USD22.3 billion, up from USD21.4 billion in 2022.
"We exclude Zambia (Restricted Default) and Ghana (CC) from these figures, due to uncertainty over how debt restructuring will affect their service payments. The World Bank’s figures and debt definitions may differ from Fitch’s in some cases." Report said.
Refinancing conditions are currently challenging for low-rated sovereigns against a backdrop of rising interest rates in most developed markets.
However, few SSAx sovereigns have Eurobond maturities in 2023.
Among those that do, Nigeria (B-/Stable) faces a USD500 million bullet payment in July, while Rwanda (B+/Negative) will need to pay USD61 million outstanding on a bond maturing in May.
Cote D’Ivoire (BB-/Stable) and Gabon (B-/Positive) also face payments, in December, of USD56 million and USD37 million respectively, while Cameroon (B/Stable) has debt repayments of USD50 million annually in 2023-2025.
The World Bank indicates that total debt service due in 2024 will increase by approximately 12% to USD25 billion.
The number of sovereigns facing large Eurobond bullet maturities will also increase, with Kenya (B/Stable) facing a USD2 billion payment in June and Ethiopia (CCC/Under Criteria Observation) a USD1 billion payment in December.
Cote D’Ivoire also has bullet maturities in July and December, and Gabon in December, though the outstanding amounts are smaller, with Cote D’Ivoire facing total bond payments of USD196 million in 2024 and Gabon USD37 million. Benin (B+/Stable) also faces bond payments of USD63 million in 2024.
Ghana has bullet payments of USD149 million due in August 2023 and USD333 million in January 2024, but these may be affected by its restructuring.
World Bank data show aggregate SSAx sovereign debt service payments in 2025 rising by around 7% to USD26.8 billion, with relatively large bond maturities falling due in Angola (B-/Positive), Cote D’Ivoire, Gabon, Ghana, Kenya, Namibia and Nigeria.
The risk of debt service obligations catalysing external liquidity stress into severe macroeconomic instability or default, as seen in Sri Lanka in 2022, will be more marked where foreign-exchange reserves are insufficient to provide a buffer against payment strains.
Public reserves data is not timely for some rated SSAx sovereigns, and others are members of monetary unions with shared reserve pools.
However, for the eight that have reported reserves individually in the last six months, four – Angola, Republic of Congo (CCC+), Ethiopia, Kenya and Mozambique (CCC+) – face external debt service payments in 2023 equivalent to more than one-quarter of their latest reported reserves.
Cabo Verde’s (B+/Stable) are also high, equivalent to around 23% of latest reported reserves.
In Angola, escrow accounts for the service of debt to Chinese creditors bolster the government’s liquidity available for debt service.
"We view Ethiopia’s reserves of USD1.5 billion at end-June 2022 as low relative to the size of the bond falling due in 2024, although debt service on the bond is modest. Ethiopia is seeking a new IMF agreement and, since early 2021, debt treatment under the G20’s Common Framework." Report revealed.
Access to international debt markets may improve for SSAx sovereigns in 2023-2025 if global interest rates fall from their cyclical peaks or international investor sentiment improves, facilitating refinancing. If it remains challenging, meeting debt-service payments via reserve drawdowns could add to downward pressure on sovereign ratings for several countries.
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