Figures of the week: Trends in sub-Saharan African debt and equity flows

The World Bank recently launched its latest version of the International Debt Statistics publication and databases, which provide new data on international financial flows through 2015. The report highlights that net debt flows (defined as loan disbursements minus principal repayments) to low- and middle-income countries turned negative in 2015 for the first time since the 2008 global financial crisis. This was due largely to a sharp contraction in short-term debt flows brought on by economic vulnerabilities and the effects of lower commodity prices on exchange rates, which undercut investment opportunities and growth rates. Furthermore, net financial flows (debt and equity) fell to one-third of 2014 levels, dropping to $377 billion, as stable equity-based foreign direct investment (FDI) and positive (yet reduced) portfolio equity flows offset the negative debt flows.

Table 1: External debt stock and net financial flows, sub-Saharan Africa, 2010-2015


In sub-Saharan Africa, net financial flows increased to their highest level since 2008 in 2015, reaching $82 billion, due to increases in both net debt and equity flows. Net debt flows grew by to $40 billion as debt from private creditors rose and so did net short-term debt, despite the 20 percent decrease in net debt flows from official creditors (see Table 1). Equity flows also rose by 9 percent to $42 billion as portfolio equity flows grew by 48 percent, but mainly targeted South Africa owing to declining stock prices. FDI flows to South Africa actually turned negative as political uncertainty deterred investors, yet, for the rest of sub-Saharan Africa, FDI flows remained constant. Still, the main recipient countries of FDI changed from the previous year: For example, Angola became the destination of the largest FDI inflows of the region, attracting $9.5 billion in investment (see Figure 1). Meanwhile FDI inflows to Sudan increased as Chinese investments in the oil sector continued to grow, and Kenya also experienced greater inflows due to its attractive domestic market and favorable business conditions.

Figure 1: Net FDI flows to select sub-Saharan African countries, 2015