Countries in Sub-Saharan Africa recorded the fastest accumulation of external debt stock in 2019, averaging 9.4 percent, according to the latest report from the World Bank released this week.

The increased debt stock was propelled by a comparable rise in the debt of major regional economies.

Those economies include Nigeria whose external debt was $54.8 billion in 2019 from $50.4 billion from 2018, and South Africa at $188.1 billion from $173 billion the previous year.

Rwanda’s external debt increased to $6.2 billion, $305.6 million of which were from the International Monetary Fund (IMF) in 2019 from $5.4 billion in 2018.

Amina Rwakunda, the Chief Economist at the Ministry of Finance and Economic Planning attributed the rise to the increased borrowing to implement the country’s strategy for transformation, which runs from 2017 to 2024.

"Most of the borrowing we did last year was aimed at [financing] the NST1 [National Strategy for Transformation],” she said, adding that Rwanda goes for concessional loans.

Those are loans that are extended on terms substantially more generous than market loans. They are usually given on interest rates below those that are available on the market.  

The country spent around Rwf3 trillion in the 2019-2020 financial year to finance key transformation programmes and activities compared to Rwf2.5 trillion spent in 2018-2019.

Total external debt stocks in Africa reached $625 billion in 2019 from $571 in the previous year, which is an increase of 8.64 per cent.

Long term external debt rose to $535 billion from $484 in the period, while short-term external debt reached $68 billion from $66 billion.

External debt to exports reached 153 per cent.

World Bank Chief Economist, Carmen Reinhart urged countries to manage their debt stocks well, insisting that absence of debt sustainability measures countries risk not benefitting from debt.

"Debt is what enables governments to have extra resources they need to invest in health systems, education, or infrastructure,” he said in a statement.

"If you have a debt problem, all those ambitions suffer. That’s why it’s important to get the debt onto sustainable ground as quickly as possible. We can’t afford another lost decade,” he added.

Countries in Sub-Saharan Africa accounted for the largest share of net long-term inflows at 24 per cent, followed by the East Asia and Pacific region, excluding China, at 18 per cent.

Inflows from bilateral creditors, mostly governments, were directed primarily at Sub-Saharan Africa and Europe and Central Asia.

Those from multilateral creditors, which includes International Monetary Fund, the World Bank, and other development banks, were concentrated in Latin America and the Caribbean, reflecting the large IMF inflow to Argentina,

Inflows from multilateral creditors to Latin America and the Caribbean rose 41 per cent, while those from Sub-Saharan Africa rose by 26 per cent.