Sub-Saharan Africa is striving to get its fiscal house in order, but the progress has been slow and uneven. According to the World Bank Group Africa’s Pulse Report 2024, only 10 countries in the region are on track to achieve fiscal deficits below 3% of GDP or record surpluses in 2024, raising concerns about the region’s ability to stabilize its economic health amidst growing debt pressures.
The report indicated that with just 10 countries maintaining fiscal discipline by keeping their deficits below 3% of GDP or achieving a surplus, the majority of the region will continue to face significant challenges. As the report stated, high deficits would make it harder for countries to fund key sectors like infrastructure and social programs without accumulating more debt.
The report highlights that, while the median fiscal deficit across the region is expected to decline from 3.9% of GDP in 2023 to 3.3% in 2024, the majority of African countries are still grappling with larger fiscal imbalances. The report noted that factors like rising debt service costs and increasing interest payments continue to undermine the benefits of fiscal consolidation.
As governments attempt to address these issues, the report mentioned efforts such as cutting unnecessary expenditures by eliminating ghost workers from payrolls and reforming fuel subsidies. However, as the report pointed out, mounting debt is limiting their capacity to invest in critical sectors like infrastructure, human capital, and energy.
The region’s debt burden is also highlighted, noting that Sub-Saharan Africa is expected to pay approximately US$19 billion in interest on external debt in 2024. It emphasized that much of this debt is owed to private creditors and non-Paris Club governments, which has placed substantial pressure on fiscal balances.
The high cost of borrowing has hampered fiscal consolidation and increased the risk of debt distress, with more than half of the region’s International Development Association (IDA)-eligible countries already facing high debt distress or being on the brink of it.
Unless governments take decisive steps to manage their debt more effectively and adopt more transparent debt management practices, fiscal sustainability will remain a challenge for much of Sub-Saharan Africa.
