Fitch: Weak fiscals, slow vaccination dampens SSA recovery

Fitch Ratings has raised concerns about the post-COVID-19 recovery for Sub-Saharan African sovereigns, citing weak public finances and the slow pace of coronavirus vaccinations as dampening factors. Jan Friedrich, Senior Director at Fitch Ratings, discussed these challenges in a recent interview with CNBC Africa. One of the key issues highlighted by Friedrich is the significant increase in debt that many countries in the region have experienced due to the pandemic. This rise in debt has put pressure on governments to consolidate their finances, leading to potential austerity measures that could impact growth prospects. Friedrich emphasized that the impact of the crisis on debt across the continent has been substantial, with only a few exceptions. Another major concern raised by Fitch Ratings is the need for revenue mobilization in Sub-Saharan Africa. Despite calls from international financial institutions to focus on increasing revenues, many countries in the region continue to face challenges in generating income. This issue, coupled with expenditure pressures and limited access to finance, could result in higher deficits and increased debt levels. Friedrich emphasized the importance of balancing expenditure with revenue mobilization to prevent further financial strain. Regarding the timeline for potential fiscal pressures, Friedrich noted that these challenges have already been present since last year. The limited support measures implemented by most Sub-Saharan African countries, relative to the scale of the crisis, have had a noticeable impact on their finances. Friedrich suggested that these pressures could continue to manifest in the coming months, with ongoing expenditure demands straining already fragile balance sheets. Focusing on specific countries, Friedrich addressed the situation in Nigeria. While acknowledging the positive impact of rising oil prices on the country's economy, Friedrich expressed concerns about low fiscal revenues and debt sustainability challenges. Despite Nigeria's relatively low debt-to-GDP ratio, the more critical metric of debt-to-revenue ratio poses a significant challenge, particularly at the federal government level. Friedrich also highlighted the potential negative implications of exchange rate stabilization measures on GDP growth and foreign investment in Nigeria. In conclusion, Friedrich emphasized the need for Sub-Saharan African countries to address the dual challenges of weak public finances and slow vaccination rates to support a sustainable post-pandemic recovery. Despite some positive developments, such as rising oil prices in Nigeria, it is crucial for governments in the region to strike a balance between expenditure, revenue generation, and debt management to navigate the uncertain economic landscape ahead.