Fitch Solutions has indicated that budget shortfalls in Ghana, Uganda, and Nigeria are expected to be substantial, as outlined in their article titled “Return to International Capital Markets Belies Persistence of Fiscal Risks in Sub-Saharan Africa.”
The UK-based firm reported that many governments in the region will continue to rely on domestic and external borrowing to address budget deficits in 2025. This situation arises amid mixed progress in fiscal consolidation efforts across Sub-Saharan Africa (SSA).
Despite a gradual regional shift toward monetary easing, domestic yields remain high. According to the quarterly Gross Domestic Product-weighted average of SSA 10-year government bonds, yields reached 12.63% in Q2 2024, surpassing the previous peak of 12.62% recorded in Q4 2022, which was prompted by Russia’s invasion of Ukraine and the subsequent tightening of global financial conditions.
The spread between SSA 10-year government bonds and 10-year US Treasuries has also widened, highlighting various domestic pressures, including monetary tightening in Nigeria and election-related volatility in South Africa. High yields persisted into the fourth quarter, particularly in Nigeria and Kenya, reflecting ongoing monetary tightening and heightened political risks, respectively.
SOURCE: https://dew360.net
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