A new Moody’s report explains that some Sub-Saharan Africa economies cannot absorb economic shocks

An Africa woman selling fabrics in a market
  • Moody’s, a global advisory services firm, has released on Sub-Saharan African sovereigns' ability to cut spending on economic shocks.
  • Rwanda, Cameroon and Cote d'Ivoire have greatest spending flexibility.
  • Namibia, Mauritius, South Africa, and Ghana have the highest level of mandatory spending.

Some Sub-Saharan African economies are weaker in fiscal position, exposed to shock and may not be able to consolidate their budgets to stabilise debt, Moody’s said in its new report.

According to the report, some African economies are vulnerable to potential negative economic and financing because of their weaker fiscal position than 5 years ago.

In the event of shocks, Moody’s said spending flexibility allows sovereigns to broadly adhere to their plans and lends resiliency to fiscal strength.

David Rogovic, Moody's Vice President - Senior Analyst and the report's co-author, said, “Expenditure cuts are often less complex to implement quickly than revenue-raising measures.

"The credit risks associated with lack of spending flexibility are most pronounced where it coincides with higher debt burdens and for those whose fiscal metrics are more vulnerable to shocks."

Based on the report, Rwanda, Cameroon, and Cote d'Ivoire have the most flexible spending structures while higher-than-average spending flexibility in Rwanda and Cameroon mitigates some of the risks associated with a rising government debt burden, “if governments are willing and able to use that flexibility in the face of a shock.

On the flip side, mandatory spending accounts for over 80% of total spending in Namibia, Mauritius, South Africa, and Ghana while rigid expenditure combines with other fiscal weaknesses to increase pressure from shocks on fiscal strength and credit profiles in Namibia and Ghana.

The new report is coming when fears of recession brew across the globe.

The Brexit economic implications and its impacts on Africa, discouraging economic data in Germany and China as well as the trade dispute with President Donald Trump.

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