# **2.3 Spotlighting countries with rapid debt accumulation**

The long-term overview perspective of the past subsections presents a generally benign debt situation for SSA countries as a whole. However, this conclusion masks a high degree of heterogeneity among countries. Some countries may have exacerbated their debt-related vulnerabilities in recent years, although this may be understated when compared with the very high debt levels prevailing before countries received debt relief. This subsection spotlights countries with recent episodes (i.e., since debt relief) of a rapid change in debt stocks, as reported in the countries’ DSAs. The sample for the analysis is the set of countries with a recent DSA, which is consistent with Sections 3 and 4 that look into debt dynamics and sustainability risks. Before proceeding it should be noted that the analysis here is not expected to deliver the same results as a full DSA, as reflected in Section 4, because while we look at debt accumulation since debt relief, the DSA looks at a larger set of (5) indicators projected over 20 years (see Box 1).

Debt accumulation is calculated for each country and used to flag rapid debt growth. For all 31countries, the change in PPG external debt (and total public debt) as a share of GDP is calculated between the minimum value observed after HIPC (i.e., after 2005) and the latest available data point (either 2013 or 2014).<sup>5</sup> The change in indebtedness is used to classify countries in three debt-growth categories: low, moderate and high debt accumulation.<sup>6</sup> Combining this classification with the final debt-to-GDP ratio observed in either 2013 or 2014,<sup>7</sup> countries are subsequently classified in three categories: (a) low growth and low final debt; (b) moderate growth and moderate final debt; and (c) high growth and/or high final debt. Results are shown in Table 2.2.<sup>8</sup> It should be noted that Mauritania is classified in category (c) wholly on the basis of its high initial indebtedness (above 70 percent); the change in the country’s debt was a modest 6 percentage points. Sudan also had high initial debt (above 50 percent) but also demonstrated rapid accumulation.<sup>9</sup> There are important differences between the methodology reflected in Table 2.2 and debt sustainability risk assessments found in DSAs. Table 2.2 highlights countries that have shown rapid external PPG debt-to-GDP accumulation, which may not correspond to debt sustainability risk ratings. Most notably, DSAs may conclude there is heightened risk of debt distress based on debt ratios besides debt-to-GDP. For example, Burundi is high risk of debt distress in its most recent DSA due to a high debt-to-exports ratio (which we don’t consider here), despite its debt-to-GDP ratio remaining relatively low. A similar situation occurs with Ghana. The following section uses the DSA database to further explore the debt dynamics of different country groups, including those classified in category (c) in Table 2.2 below.

> 5 Note that the criteria differs from Figures 2.3 and 2.4, where the initial and final data points are the same for all countries (2007 and 2013, respectively). 6 For external PPG low accumulation is a change in indebtedness of less than 10 percentage points (pp), moderate accumulation is a change in indebtedness between 10 and 15 pp, and high accumulation is a change in indebtedness greater than 15 pp. The selection of cut-offs was sample-driven. 7 We consider external PPG debt to be low if it is less than 30 percent of GDP, moderate if it is between 30 and 40 percent of GDP, and high if it is above 40 percent of GDP. The selection of thresholds was sample-driven; thresholds are not comparable to the DSF thresholds which are based on PV and are country specific. 8 Cut-off values for total public debt are less clear-cut. However, the classification of countries (not shown in the table) broadly follows the one based on external PPG debt.

> 9 Despite methodological differences, our results broadly correspond to those reported by Merotto et al (2015), especially our category (a) and their first group of countries.

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