The spillover from the Middle East war is straining the finances of African countries, with the debt costs for some nations spiking and raising the specter of defaults, according to comments from Citigroup's chief Africa economist cited by Semafor Africa.
The surge in energy and food prices, as well as the persistence of higher interest rates in advanced economies, have driven up the cost of external borrowing for African countries, some of which are now on high alert for potential debt defaults. The International Monetary Fund (IMF) also forecasts that economic growth in sub-Saharan Africa will decelerate in 2026, as countries that were just emerging from the debt buildup during the COVID-19 pandemic now face renewed inflationary pressures stemming from the conflict.
Citigroup's Africa chief economist highlighted Malawi, Mozambique, and Senegal as countries that face a heightened risk of defaulting on their debt obligations within the next two years. For Japanese professionals involved in frontier market bond investments, trade insurance, and JBIC/JICA projects, closely monitoring sovereign credit ratings, credit default swaps, and the progress of IMF programs in the region will be crucial in the coming period.