percent of GDP between 2008 and 2013. The largest jump came in 2012, when poor crops drove a large export contraction and the Kwacha depreciated heavily, which drove external PPG up by more than 20 percentage points. The Gambia also ran larger than average current account deficits (14 percent of GDP on average between 2008 and 2013). The effect on external PPG debt was further exacerbated by depreciations in 2009 and 2013.

# **3.3 Projected debt dynamics for public and external debt**

Aggregating results across recent DSAs shows that public debt as a share of GDP for the SSA region as a whole is projected to decrease at increasing rates starting in 2015, from a level of around 45 percent of GDP in 2014. This dynamic is projected to be driven by sustained improvements in the fiscal balances and sustained GDP growth. The contribution of both real GDP growth (negative) and the average real interest rate (positive) are projected to remain stable through the projection period, but the contribution of the latter is minor. At roughly -0.3 percentage points of GDP per year, on average, the contribution of the exchange rate appreciation over the medium term through 2019 is negligible.

Public debt is expected to remain stable for oil exporting countries at around 22-23 percent of GDP, while it is projected to decrease for all the other groups. For LMICs, debt ratios are projected to drop significantly from 70 percent in 2014, to 62 percent in 2019, reaching 46 percent in 2033. The main drivers of this debt reduction are continuous improvements in primary balances – reaching surpluses during 2018-2020, and stabilizing at small primary deficits afterwards – and sustained GDP growth. For oil exporting countries primary surpluses and growth contribute to a debt reduction that is offset by an accumulation of assets, thus external debt-to-GDP remains stable.

For LICs, public debt-to-GDP ratios are projected to drop slowly by 0.4 percentage points on average each year, from 46 percent in 2014 to 44 percent in 2019, reaching 40 percent in 2033. Strong and stable GDP growth is expected to offset persistent, albeit slightly decreasing, primary deficits. For fragile economies, GDP growth is projected to more than offset reduced primary deficits, contributing to a reduction in public debt ratios of 7 percentage points during 2015-2019 (from 42 percent to 35 percent). Public debt is expected to reach 20 percent by 2033.

The average external debt-to-GDP ratio projected for the SSA region is estimated to remain stable in the medium term, near 40 percent of GDP. This dynamic is explained by projected sustained net FDI inflows and low economic growth, which together only partially offset persistent current account deficits. The ratio of external debt-to-GDP is expected to decrease in LMICs, to stabilize in oil exporting countries and fragile economies, and to slightly increase in LICs. In the case of LMICs this is mainly explained by decreasing current account deficits that are offset by FDI inflows, sustained GDP growth and some appreciation of currencies, while more expensive borrowing terms continue to push debt ratios up. LICs project large current account deficits that slightly increase over time, impeding any debt reduction. Fragile economies, on the other hand, are expected to have a decreasing path in both current account deficits and net FDI inflows, thus keeping external debt stable.

Projected real exchange rate movements will contribute to reduce external indebtedness in the baseline scenario for the SSA region as a whole. In fact, the contribution from price and exchange rate changes is expected to generate an average cumulative reduction in external debt ratios of roughly 5.5 percentage points through 2019. Only a few countries are the exception: Republic of Congo, Ghana, Mauritania and Sudan, for which the contribution from price and exchange rate variations is expected to push debt ratios up in the medium term – the cumulative effect amounts up to 2.6, 7.9, 3.3 and 6.7 percentage points respectively.For 14