African countries red-flagged top lenders
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Insight & Analysis - February 22, 2022

5 African Countries Red-Flagged by Top Lenders

Top lenders, such as China, have taken a step back in lending to African countries.

As the debt levels on the continent increase, some African countries are now red-flagged zones to top lenders. In the next two years, they will be confronted with debt issues as a period of unparalleled pandemic-induced stimulus and relief for impoverished countries comes to an end.

As a result, some top lenders such as China have taken a step back in lending to African countries. Jibran Qureishi, head of African research at Standard Bank Group, in an interview with Bloomberg, said, “Debt sustainability now requires sharper focus”. These countries are termed “fragile five”. Here is the list of the vulnerable African countries red-flagged by top lenders.


Jibran Qureishi said Ghana would most likely require a package from the International Monetary Fund to regain investor trust. This is because the debt of the West African country today involves a premium of more than 1,000 basis points over US treasuries, which is deemed distressed. Also, when the United States Federal Reserve raises interest rates and Ghana’s budget objectives become difficult, lenders perceive a re-financing in the Eurobond market as not feasible.

According to the research analyst, Ghana’s last resort will be the international Money Fund (IMF) if it cannot boost its fiscal policy as China is more hesitant about lending to African countries. However, balancing the public funds may be insurmountable due to the government’s inflated income projections. Any attempt to cut spending could face hurdles, with public-sector stipends and debt-service costs accounting for more than half of expenditure.


Although the country can refinance its loans and is contemplating issuing a $1 billion Eurobond in the first half of the year, its political activities, such as the election slated for August, may delay attempts to reduce the budget deficit and borrowings.

According to Standard Bank, East Africa’s biggest economy has amassed debt, with a significant amount of commercial loans, implying that servicing expenses currently account for 35% of foreign exchange reserves and 43% of taxable income.

From a budgetary standpoint, Kenya, according to Jibran Qureishi, is in the same boat as Ghana. The key difference between the two countries is Kenya’s International Monetary Funds program, obtained in 2021.


During the epidemic, Angola benefited greatly from the G-20 nations’ Debt Service Suspension Initiative, which permitted the oil-rich country to postpone over $3 billion in loan payments in 2021.

However, with the International Money Funds (IMF) initiative coming to an end, Qureishi advised them to be careful as uncertainty about future bilateral debt discussions and lacklustre oil industry investments might limit output. According to Standard Bank, the country has the prospect of getting a credit-rating upgrade in 2022.


According to Standard Bank, Ethiopia’s debt may look manageable due to the relatively low amount of loans by the commercial lenders, but the country will need to reprofile due to foreign-exchange shortages aggravated by the pandemic and lengthy civil war.

Jibran Qureishi said, “Ethiopia is on the brink” of a potential default”. He said the country intends to reorganise borrowings under the G-20s, a step that is likely to stymie foreign credit. This implies that IMF payments would only be restarted if progress is made. He, therefore, expressed alarm about the country’s low foreign-exchange reserves, which were last reported at $2.3 billion in May.


In 2020, Zambia turned out to be the first country on the continent to default on its loan during the pandemic. It has subsequently gotten staff-level approval for a $1.4 billion IMF loan, which is conditional on progress on debt restructuring under the Common Framework. According to Qureishi, loans may be restricted as the stand of China in the country is uncertain.


READ ALSO: Top 7 African Countries with the Most Chinese Debt

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