{"id":47439,"date":"2025-10-18T10:22:52","date_gmt":"2025-10-18T07:22:52","guid":{"rendered":"https:\/\/www.thereporterethiopia.com\/?p=47439"},"modified":"2025-10-18T10:22:52","modified_gmt":"2025-10-18T07:22:52","slug":"imf-sounds-alarm-over-sub-saharan-africas-rising-domestic-debt","status":"publish","type":"post","link":"https:\/\/www.thereporterethiopia.com\/47439\/","title":{"rendered":"IMF Sounds Alarm over Sub-Saharan Africa\u2019s Rising Domestic Debt"},"content":{"rendered":"

Domestic institutions now hold half of region\u2019s public debt<\/strong><\/p>\n

Around half of all public debt in Sub-Saharan African countries is now held by domestic institutions, a trend that has steadily increased over the years and is reshaping the region\u2019s financial landscape, the International Monetary Fund (IMF) reported this week.<\/p>\n

Abebe Aemro Selassie, head of the IMF\u2019s African department, said the shift toward domestic borrowing has been both a mark of resilience and a source of growing concern.<\/p>\n

\u201cThis is the point we\u2019ve been highlighting for several years,\u201d he said during a press briefing on Thursday, part of the IMF-World Bank Annual Meetings. \u201cAt this moment, our estimation is that about half of total public debt is held by domestic institutions.\u201d<\/p>\n

Abebe noted that African governments have turned to domestic banks to sustain spending levels and economic activity in the face of declining external financing. He described the trend as a double-edged sword.<\/p>\n

While domestic borrowing has helped African governments cope with tightening external financing conditions, it has also created new risks in economies already burdened by high debt.<\/p>\n

In its latest Regional Economic Outlook for Sub-Saharan Africa report, the IMF warned that foreign aid, a vital source of funding for many low-income and fragile states, is falling rapidly.<\/p>\n

The organization estimates that bilateral aid to Sub-Saharan Africa could decline by up to 28 percent this year, threatening essential services in countries such as South Sudan, Niger, and the Central African Republic.<\/p>\n

\u201cHealth, education, and humanitarian programs are particularly vulnerable,\u201d the IMF cautioned, noting that governments already have limited fiscal space to absorb such shocks.<\/p>\n

\u201cWe are now observing a situation where there are significant vulnerabilities, particularly in those countries where public debt is at very elevated levels,\u201d Abebe also warns. \u201cThe risk of distress is higher, and we\u2019re seeing some pressures on bank balance sheets or potential pressures on banks\u2019 balance sheets.\u201d<\/p>\n

This pressure varies from country to country depending on the extent of vulnerabilities, and is\u00a0 particularly concerning for nations where public debt levels and interest rates are particularly \u201cWe are working with governments to ensure there is a robust regulatory framework and sound capitalization plans for banks. Most importantly, the first line of defense is to keep public finances on a healthy trajectory to minimize potential spillover risks,\u201d said Abebe.<\/p>\n

He recalled an IMF assessment from six months ago, which highlighted the region\u2019s strong performance, with growth exceeding expectations last year. However, he added, the situation has since been affected by a \u201csudden realignment of global realities\u201d amid increasingly turbulent external conditions, marked by weakened demand, softer commodity prices, and tighter financial markets.<\/p>\n

\u201cToday, these global headwinds continue to test the region\u2019s recovery and resilience,\u201d he said. \u201cWe now estimate that Sub-Saharan Africa\u2019s economic growth will remain steady at 4.1 percent this year, with a modest pickup expected in 2026.\u201d<\/p>\n

Abebe attributes the growth forecast to progress in macroeconomic stabilization and reform efforts across major economies in the region, including in Ethiopia.<\/p>\n

He also pointed out that several countries such as Benin, C\u00f4te d\u2019Ivoire, Ethiopia, Rwanda, and Uganda are among the fastest-growing economies in the world. However, Abebe cautioned that resource-intensive and conflict-affected countries continue to face significant challenges, achieving only modest gains in per capita income.<\/p>\n

The issues are compounded by an increasingly difficult external environment that has seen global growth slow and commodity prices diverge.<\/p>\n

\u201cOil prices are declining, while the prices of copper, coffee, and gold remain fairly elevated,\u201d said Abebe.<\/p>\n

He mentioned that external financing conditions have shown some improvement, allowing countries such as Kenya and Angola to recently access international capital markets. However, he cautioned that the global trade and policy landscape has deteriorated further, placing further strain on the region\u2019s fragile recovery.<\/p>\n

Tariffs on exports to major markets such as the United States have increased, while the expiration of preferential access under the African Growth and Opportunity Act (AGOA), will hit export-oriented economies like Lesotho and Madagascar.<\/p>\n

The IMF has urged African governments to focus on mobilizing domestic revenues and strengthening debt management as a way to safeguard macroeconomic stability and sustain development.<\/p>\n","protected":false},"excerpt":{"rendered":"

Domestic institutions now hold half of region\u2019s public debt Around half of all public debt in Sub-Saharan African countries is now held by domestic institutions, a trend that has steadily increased over the years and is reshaping the region\u2019s financial landscape, the International Monetary Fund (IMF) reported this week. Abebe Aemro Selassie, head of the […]<\/p>\n","protected":false},"author":72,"featured_media":47440,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"editor_plus_copied_stylings":"{}","ngg_post_thumbnail":0,"footnotes":""},"categories":[1960,13],"tags":[],"class_list":{"0":"post-47439","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-latest-news-in-ethiopia","8":"category-latest-ethiopian-political-news"},"acf":[],"_links":{"self":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts\/47439","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/users\/72"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/comments?post=47439"}],"version-history":[{"count":0,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts\/47439\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/media\/47440"}],"wp:attachment":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/media?parent=47439"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/categories?post=47439"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/tags?post=47439"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}