The tumbling value of local currencies is threatening a debt crisis in sub-Saharan Africa, a thinktank has warned, with Nigeria, Ghana and others facing a combined extra bill of $11 billion. David Pollard reports.
Debt crisis. It's a phrase Europe has made its own in recent history. Could it be Africa's turn next? SOUNDBITE (English) JUDITH TYSON, AUTHOR, OVERSEAS DEVELOPMENT INSTITUTE, SAYING: ''The risk of default in sub-Saharan Africa is growing ... Many countries are borrowing simply too much relative to the size of their economies, but secondly, governments are also borrowing in US dollars. In the last year, many African currencies have depreciated sharply against the dollar and that means the value of that debt in local currencies has grown.'' And how. Judith Tyson's report for leading think-tank, The Overseas Development Institute, says African nations face extra currency costs for their debt of nearly eleven billion dollars. That's around 1.1 per cent of the sub-Saharan region's GDP. And a huge extra burden in comparison to a total debt stock estimated at $18 billion. Nigeria could top the anxiety list. Its currency, the naira, made double digit losses against the dollar last year. And despite multiple central bank interventions, is still tumbling to new lows. Economic problems there are mainly summed up in one word: oil. The halving of the price of crude crippling Nigeria's earnings. SOUNDBITE (English) JUDITH TYSON, AUTHOR, OVERSEAS DEVELOPMENT INSTITUTE, SAYING: ''Oil prices and copper prices have collapsed. That's been very challenging for countries where that's their main export. And secondly the slowdown in China is affecting the whole continent. Again it's one of their main export markets.'' Ghana's cedi dropped over 30% against the dollar last year. Its struggles to bring fiscal deficits under control forcing it to seek IMF help. There are other catalysts too. A massive surge of foreign funds pursuing the Africa growth story. And frittering by cash-rich economies. SOUNDBITE (English) JUDITH TYSON, AUTHOR, OVERSEAS DEVELOPMENT INSTITUTE, SAYING: ''Mozambique borrowed $850 million through the international bond markets. Their stated purpose for those funds was to back the fishing industry. Obviously, in terms of economic growth, that's very useful. But in fact it was widely rumoured that they spent it on military gun boats.'' A debt crisis isn't inevitable, says the ODI. But if it happens, just think, it says, of homes lost in the US, Asian food shortages and the euro zone's massive unemployment problem to see the damage done by previous crises.