PARIS: While the explosion of debt is throwing a shadow over global economic growth, experts warn that sub-Saharan Africa, where several countries are already in default, is experiencing its worst-ever crisis.

The rise in interest rates and over-indebtedness is already crimping the ability of countries to finance their development, as a number of African leaders emphasised at appearances at the World Economic Forum in Davos.

Following the 2007-2009 global economic crisis central banks in industrialised countries have generally kept interest rates low and countries from the Global South, which had mostly beenborrowing bilaterally or from international financial institutions, gained unprecedented access to financial markets.

“Many developing countries in a desperate need for cash injection in their economies rushed to these low-cost loans, in markets with no rules or regulation,” said Kenyan economist Attiya Waris, who also serves as an independent expert for the United Nations.

She added that the International Mone­tary Fund had encouraged them to do so.

The money helped provide a much-needed boost to many African economies, but countries depen­dent upon the export of raw materials such as oil, minerals and wood came under intense pressure when commodity prices began falling in 2015.

The Covid pandemic further aggravated the situation.

The fall in commodity prices squeezed the foreign currency revenues they needed to service their loans.

Published in Dawn, January 21st, 2024