Mauritius, the SSA Sovereign most dependent on tourism for growth, will experience higher than historical growth of 7.8% in 2021 after contracting almost double that in 2020, driven by a favourable base effect and the potential benefits of vaccine evolution on a global tourism recovery. The shock to export and foreign exchange generating sectors will continue to weigh on current account imbalances. The current account deficits for Mauritius, Kenya, Tanzania and Namibia will revert to historical levels of 9.5%, 5.6%, 1.9% and 2.5% of GDP, respectively, in 2021. In SSA, higher external vulnerability indicators (EVIs) – which are a measure of short-term debt and upcoming external debt maturities against international reserves – will be more challenging for sovereigns outside of monetary unions. Zambia and Ghana will see the greatest EVI pressures, with 2021 levels forecast to be 509% in Zambia and 143% in Ghana. EVI level for Mauritius was lowest for the SSA countries included in the report published on 13 January 2021 and titled ” 2021 outlook negative as debt costs intensify amid limited institutional capacity to adjust post pandemic’.
“With few exceptions such as Mauritius, South Africa, Nigeria, Botswana and Namibia, foreign-currency debt accounts for over 60% of government debt in the SSA region. Mozambique (Caa2 stable), Rwanda, Senegal, the Republic of the Congo and Angola are particularly susceptible to currency depreciations inflating their debt burdens, with foreign-currency debt comprising over 70% of their total debt stocks. Local currencies in Angola and Ethiopia to depreciate by approximately 10% and 20%, respectively, in 2021 amid challenging government financing conditions, making it more expensive for those countries to service foreign-currency obligations. Larger SSA economies, such as South Africa, and sovereigns with large financial sectors such as Mauritius, will be able to access deeper domestic markets, minimising liquidity risks in 2021. But for most SSA sovereigns, domestic markets are less developed and much shallower, limiting scope to finance large borrowing requirements. This will lead to higher interest rates and a shortening of maturities, challenging both debt affordability and liquidity. The inability to correct fiscal imbalances and weak debt management capacity – factors that contributed to deteriorations in fiscal strength across much of the region – are reflected in our assessments of the strength of institutions and governance. “ as cited in the report.
In the past decade, only Côte d’Ivoire, Mauritius and Botswana have a track record of reversing upward debt trajectories. Institutional shortcomings can also show up in undisclosed arrears to goods and services
providers or through poor fiscal transparency, which in some cases can result in financial misreporting or the revelation of unreported liabilities.
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