Macro Analysis /
Global

Africa fiscal resilience overview

  • Fiscal rectitude reflects how prudent government fiscal policy is

  • The report shows how vulnerable a country is to debt rollover risk

  • The report will also provide a visual overview of how exposed a country’s debt is to a currency crisis

Kieran Siney
Kieran Siney

Head of African Markets

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ETM Analytics
8 September 2021
Published byETM Analytics

ETM Fiscal Resilience Framework

Fiscal rectitude - Fiscal rectitude reflects how prudent government fiscal policy is, utilising five core indicators. We consider what market risk premiums look like, how volatile government yields are, how externally exposed a country is, whether the yield curve is consistent with inflation dynamics, and how prudent government spending is relative to the level of taxation. The chart to the left provides an overview of the five pillars included in the Fiscal Resilience Framework.  

This report looks at two of the five pillars (highlighted in green) of the Fiscal Resilience Framework to provide a visual snapshot of debt dynamics across 10 African countries. The report shows how vulnerable a country is to debt rollover risk. The standout here is Zambia, with a significant portion of its debt maturing next year. Global financial market conditions are likely to start tightening next year, which will make it harder and costlier for higher beta countries to issue debt and in Zambia’s case roll over the massive amount of debt maturing in 2022.

The report will also provide a visual overview of how exposed a country’s debt is to a currency crisis based on what percentage of total outstanding debt is denominated in hard currency. Greater ratios of foreign currency debt to total debt are associated with increased risks of currency and debt crises. However, the strength of the association depends crucially on the size of a country’s reserve base and its policy credibility. (See full report for visual overview)