Low-income Countries Urged to Conduct Debt Sustainability Analyses Regularly

The Covid-19 pandemic amplified the debt vulnerabilities across many developing countries necessitating countries to frequently undertake sustainability analyses. Officiating at the recently conducted Joint MEFMI, IMF and World Bank  Regional Workshop on Debt Sustainability Analysis (DSA) for Low-Income Countries (LIC), Dr. Patrick Hitayezu, the Chief Economist, in the Ministry of Finance and Economic Planning in Rwanda, urged officials to conduct DSA for their countries on a regular basis and mainstream the findings in the economic management decision making processes to inform policy responsive measures to address debt vulnerabilities induced by the COVID-19 pandemic.

The workshop was held from 13 to 17 February 2023 in Kigali, Rwanda and the objective of the workshop was to impart knowledge and skills on the use of the revised IMF/World Bank Debt Sustainability Framework (DSF) to assess debt sustainability in low-income countries.

Speaking during the same workshop, Dr. Louis Kasekende, the Executive Director of MEFMI urged participants to take the DSA issues seriously as this is one of the main policy tools to inform macroeconomic and debt management decisions. He highlighted that the continuous building-up of public debt by Sub-Saharan African countries to finance their development aspirations, and the improved access to new sources of financing including the international capital markets in the last decade elevated debt vulnerabilities.

Furthermore, with the outbreak of the COVID-19 pandemic in 2019, developing countries increased public sector borrowing to finance the pandemic-associated spending under a backdrop of declining economic activity and shrinking fiscal space. As a result, the medium and long-term debt sustainability indicators have worsened in many countries in the region, thereby raising concern among policymakers, analysts, and international financial institutions about the prospect of a looming debt crisis. Hence, participants were encouraged to conduct DSAs in their respective countries and use the results to proffer advice to policymakers.

A total of 35 officials attended the workshop. Of which 30 officials were from the MEFMI member countries (Kenya, Lesotho, Malawi, Mozambique, Rwanda, Tanzania, Uganda, Zambia, and Zimbabwe) and 5 officials were from Ethiopia and South Sudan. The officials from non-MEFMI member countries attended the workshop under the auspices of the IMF AFRITAC East and South. Participants were drawn from central banks, ministries of finance, economic planning and development.

Five (5) resource persons facilitated at the workshop, comprising two (2) from the World Bank (Messrs Christopher Paul Dielmann and Juan Passadore), two (2) from the IMF (Messrs Tiviniton Makuve and Mark Hendrik De Broeck), and Cristina Dimande of the MEFMI Secretariat.

The workshop was delivered through PowerPoint presentations complemented with practical exercises and quizzes. Presentations covered the key concepts underpinning the DSA and a walk-through of the basic features of the LIC DSF workbook. The exercises covered practical work and discussion on the LIC DSF data inputs sheets and output tables. Further, the exercises assessed whether participants had grasped concepts of the LIC DSF discussed during the lectures and helped to further consolidate the knowledge and skills gained in the course.

By Cristina Dimande