Sub-Saharan African nations are at growing risk of debt distress because of heavy borrowing and gaping deficits, despite an overall uptick in economic growth, the International Monetary Fund said on Tuesday.

"What really we’re concerned about is the pace of increase, rather than the average,” IMF Africa Director Abebe Aemro Selassie told Reuters at the launch of its economic outlook for the region in Accra.

"The Fund projected the rate of economic expansion would rise to 3.4 percent this year, up from 2.8 percent in 2017, boosted by global growth and higher commodity prices.

Slower growth in South Africa and Nigeria – the continent’s two largest economies – weighed on the region-wide average, but the IMF expects growth to pick up in around two-thirds of African nations.

Meanwhile, around 40 per cent of low-income countries in the region are now in debt distress or at high risk of it, the IMF report said. And refinancing that debt could soon become more costly.

African governments issued a record $7.5 billion in sovereign bonds last year, 10 times more than in 2016. And they have issued or plan to issue over $11 billion in additional debt in the first half of 2018 alone, the report said.

Foreign currency debt increased by 40 per cent from 2010-13 to 2017 and now accounts for about 60 per cent of the region’s total public debt on average, IMF data showed. Average interest payments, meanwhile, increased from 4 per cent of expenditures in 2013 to 12 percent in 2017.

Six countries – Chad, Eritrea, Mozambique, Congo Republic, South Sudan and Zimbabwe – were judged to be in debt distress at the end of last year. And the IMF’s ratings for Zambia and Ethiopia were changed from moderate to "high risk of debt distress.”

The IMF conceded that Africa’s enormous needs will continue to demand heavy investments to build infrastructure and social development. But to do so while avoiding the risk of a debt trap, the continent, which currently has the lowest revenue-to-GDP ratio in the world, will need to become

Agencies