- A recent report revealed that Ghana, Nigeria, and Uganda will face significant budget deficits.
- Sub-Saharan African governments will continue to rely on borrowing to cover deficits in 2025.
- The quarterly average of SSA 10-year government bonds rates increased to 12.63% in Q2 2024.
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Budget deficits are expected to be a significant annoyance for a number of sub-Saharan African (SSA) countries. However, a recent report revealed that the aforementioned problem would be very prevalent in Ghana, Nigeria and Uganda.
The report states that several governments in Sub-Saharan Africa will continue to rely on borrowing from both domestic and foreign sources to cover budget deficits in 2025, despite the region's uneven progress on fiscal reduction.
Of the countries in the region the report highlighted Uganda, Nigeria, and Ghana. These three countries are projected to have significant budget deficits.
”Budget shortfalls will be substantial in Uganda, Nigeria, and Ghana, while progress on fiscal consolidation will remain slow in South Africa and Tanzania,” the report reads.
Furthermore, the report points out that the quarterly average of SSA 10-year government bonds weighted by GDP shows that rates increased to 12.63% in Q2 2024, surpassing the previous high of 12.62% in Q4 2022.
A number of different regional variables, such as monetary tightening in Nigeria, contributed to the widening of the gap with 10-year US Treasuries.
Additionally, the report highlighted that despite the fact that domestic and foreign yields are still high, international capital markets are back in action
“In 2023, historically high interest rates in developed markets, alongside elevated risk aversion, led to a sharp decrease in emerging and frontier market debt issuance, with no SSA governments tapping international capital markets in that year,” the report reads.
“In 2023, historically high interest rates in developed markets, alongside elevated risk aversion, led to a sharp decrease in emerging and frontier market debt issuance, with no SSA governments tapping international capital markets in that year,” it adds.
Nigeria Uganda and Ghana's debt
Very recently, it was reported that Nigeria was looking to procure a $500 million loan from the World Bank to bolster basic education out-of-school children, amongst other things. This was part of the World Bank's $1.57 billion financing package to Nigeria for a new program aimed at boosting the country's health and education sectors.
In July, Nigeria’s Debt Management Office recently released a report detailing the country’s total public debt stock.
The report showed that Nigeria’s current total outstanding domestic debt stands at N65,646,263.25, while its total outstanding external debt stands at N56,024,618.24. Total debt amounts to N121,670,881.49.
Similarly, Ghana this year secured a $3 billion loan from the International Monetary Fund, to be disbursed incrementally.
According to Ghana's Ministry of Finance, as of the end of June 2024, the total amount of central government debt was GH¢742.0 billion, or 70.6% of GDP.
This shows a 22.0 percent rise as a result of the devaluation of the Cedi and creditor payments.
Meanwhile, the Bank of Uganda projects that external debt servicing will account for 35 percent of the country's GDP in 2024/2025.
As seen in a report by Reuters, Uganda's Finance Minister Matia Kasaija in a budget reading noted that the overall public debt was $24.7 billion at the end of the previous year and was expected to increase to $25.7 billion by the end of June.
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