# **Introduction**

The fiscal and debt landscape has changed significantly for many Sub-Saharan African (SSA) countries since the onset of the global financial crisis in 2007-2008. Record low interest rates worldwide coupled with the lowest SSA debt levels in decades after successful HIPC and MDRI debt relief has led to increased access to new sources of finance, especially non-concessional. For some countries there has been a sharp rise in indebtedness within a short time period, which if unchecked can lead to debt overhang problems similar to the ones seen in past decades among LICs and MICs. Further, volatile and changing global economic and financial conditions warrant a close monitoring of country debt situations in SSA. This paper moves beyond the aggregate picture to look at more detailed debt profiles and dynamics of SSA countries, and aims to unravel more country-specific risks. The paper is structured as follows. Section 1 notes important data and methodology considerations. Section 2 presents an update on debt patterns in SSA countries, covering public debt and external debt separately. Section 3 reports post-global financial crisis debt dynamics, analyzing the underlying driving forces behind recent changes in debt burdens and comparing these factors with earlier periods. Section 4 discusses key vulnerabilities to debt sustainability in SSA countries, and Section 5 provides concluding remarks.

# **Section 1. Data and Methodology**

The paper draws on a number of data sources to conduct analyses. The analysis of debt stocks in Section 2 draws on World Development Indicators (WDI) data, which are available for a broad sample of 45 SSA countries during the period 1980-2013. Insights on debt dynamics in Section 3 and the latest picture on debt sustainability in Section 4 draw on a group of 33 SSA countries with recent joint World Bank / IMF debt sustainability analyses (DSAs) conducted in either 2013 or 2014 (see Annex Table 1 for this country list).

For the identification of debt sustainability risks, the methodology includes sensitivity analyses conducted through simulations to evaluate the impact of different macro-fiscal assumptions on a country’s projected debt burden indicators, as well as looking into the recent changes in indebtedness as reported in the country’s DSAs. In both applications the sample consists of the 33 SSA countries for which there is a 2013 or 2014 DSA, which aids cross-country comparisons both in terms of debt data coverage and results. Further, the DSA – a standardized check on liquidity and solvency risks faced by low income countries – uses a uniform macroaccounting framework which provides easy ways to implement changes in countries’ macro-fiscal assumptions for the sensitivity analysis.<sup>1</sup> The use of DSAs for the analysis in Sections 3 and 4, in which cut-off dates are at least 1 year old (see projection years in Annex Table 1), implies that recent developments affecting some countries’ debt situation may not be properly captured in the vulnerability assessments. To the extent that other sources permit, we provide updates for such assessments, although those may lack the rigor of full DSAs.

Finally, the sample of 33 SSA countries with recent DSAs is representative of the SSA region as a whole. The countries with DSAs represent 86 percent of the larger sample in terms of total population. In terms of GDP the coverage is somehow lower because the small sample does not include Angola and most importantly South Africa, for both of which there is no DSA available. In terms of constant 2005 USD GDP the 33-country sample represents 53 percent of the larger sample, but 80 percent if excluding South Africa from the latter group.

1 For a detailed explanation of how a DSA is undertaken see Box 1.

2