STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS

The COVID-19 pandemic caused a sharp economic downturn in the MEFMI region, characterized by contracting GDP growth, widening fiscal deficits, and deteriorating external positions. To mitigate these effects, member states implemented a range of fiscal measures, such as VAT exemptions and social protection transfers, and monetary interventions, including cutting policy rates and reducing statutory reserve requirements. However, these responses, combined with lower revenues and higher borrowing costs, accelerated public debt accumulation and eroded debt-carrying capacity across the region. The document emphasizes the need for sustainable debt management, fiscal buffers, and economic diversification to build resilience against future shocks.

• The COVID-19 pandemic led to a significant economic contraction in the MEFMI region, with average real GDP growth falling from 2.7 per cent in 2019 to -2.8 per cent in 2020.
• The pandemic exacerbated public debt levels in the region; the average debt-to-GDP ratio rose from 63.4 per cent in 2019 to 70.6 per cent in 2020.
• Fiscal deficits widened across the region, with the average deficit increasing from -4.9 per cent of GDP in 2019 to -5.9 per cent in 2020 due to lower revenues and increased health spending.
• Commodity-dependent economies suffered severe export receipt losses; for example, Angola's goods export receipts fell by 39.7 per cent between 2019 and 2020, primarily due to a 41.3 per cent drop in petroleum product receipts.
• Fiscal responses in the MEFMI region were constrained by limited space, averaging only 2.6 per cent of GDP, significantly lower than the 7.2 per cent average in advanced countries.
• Central banks implemented accommodative monetary policies, with all MEFMI central banks cutting policy rates; the largest cuts were seen in Zambia (350 bps) and Lesotho (300 bps).
• The pandemic caused a deterioration in debt-carrying capacity and risk ratings, with countries like Malawi and Zambia seeing their ratings downgraded between 2018 and 2021.
• The tourism sector experienced devastating losses, with international tourist arrivals declining by 72 per cent in Kenya, 70 per cent in Uganda, 69.7 per cent in Rwanda, and 64.9 per cent in Tanzania.
• Digitalisation proved critical for the effective delivery of fiscal support, specifically in the rollout of targeted cash transfers.

APA

FSD Africa (n.d.). STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS. https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-1.pdf

Chicago

FSD Africa. STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS. n.d. https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-1.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS |url=https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafricandstudy, author = {{FSD Africa}}, title = {{STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS}}, institution = {FSD Africa}, url = {https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }