This archive report was first published on 10 November 2019.
Published on November 10, 2019, the latest economic outlook reports from the World Bank and the International Monetary Fund paint a mixed forecast for African countries.
Oil-dependent economies will continue to feel the pinch from depressed energy prices, suppressing their growth, while their less commodity-reliant counterparts, including East Africa, will continue to enjoy growth rates above 5 per cent.
Despite this, both groups face potential headwinds, with a major component of the downside risk relating to the debt that many African countries have accumulated.
The average debt ratio across sub-Saharan Africa is now running at 55 per cent of gross domestic product, with East Africa's economies heading towards economic asymmetry—a situation in which debt servicing will be met at the expense of equally pressing social commitments.
At a debt-to-GDP ratio of 64 per cent, South Sudan is already in dangerous territory, but Kenya and Burundi are not far behind.
A healthy South Sudan is crucial for the region, given its heavy dependence on oil revenues and its role as a major customer for Kenya and Uganda.
The bulk of East Africa's debt—now standing at more than $100 billion—has been contracted in the past seven years to feed the region's appetite for modern infrastructure.
However, planners have failed to distinguish between technological and economic efficiency, with projects such as the standard gauge railway likely to have been met by a revamped metre gauge rail at a fraction of the cost.
East Africa must take cognisance of external risk, including the ripples of the China-US trade war, which could disrupt global trade and demand, and with it our earnings from exports.
Grand infrastructure projects are great if you can afford them, but in our context, the current push of corruption-laden projects amounts to transferring the price of our folly to future generations.
