South Sudan is among Sub-Saharan African nations that are at growing risk of debt distress because of heavy borrowing and gaping deficits, says the International Monetary Fund, IMF.
IMF Africa Director Abebe Selassie said the assessment comes as African countries continue to tap international debt markets and issue record levels of debt in foreign currencies.
He said the concerned is on the pace of increased borrowing, rather than the average.
Abebe said oil producers and other resource-dependent economies such as South Sudan are seeking the sharpest growth in their debt loads.
“What we’re calling for right now is that those countries are going to need to go through fiscal consolidation,” he told Reuters at the launch of its economic outlook for the region in Accra.
The IMF believes around 40 percent of low-income countries in the region are now at high risk of it, and refinancing that debt could soon become more costly.
Much of South Sudan revenues come from oil, whose production has reduced since the outbreak of the conflict in 2013.
For the last 5 years, South Sudan has increased its borrowing, including from countries like Kuwait and Qatar, and the African Development Bank, and also seeking loans against oil deposits.
In 2016, IMF warned that if the country’s deficit is financed through borrowing from the central bank or accumulation of arrears, it would continue to fuel inflation and raise the exchange rate against the pound.
An economist had suggested that South Sudan should adopt war economy policies that allow the government to make substantial adjustments to its consumer production in order to accommodate defense production.
According to the IMF, six countries – South Sudan, Chad, Eritrea, Mozambique, Congo Republic, and Zimbabwe – were judged to be in debt distress at the end of 2017.
The world financial body said these countries should rely more on domestic revenues, tax revenues to address their development spending needs rather than borrowing to finance spending.
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