Gambia's financial woes do not portend an African public-debt crisis

Times are tough in Africa. Ebola, in addition to claiming many lives, has also damaged economies. Tourism is suffering as frightened foreigners stay away. Falling commodity prices are also taking a toll. Investors are pulling money out of riskier spots, prompted by the prospect of rising interest rates in America. The IMF is cutting its growth forecasts.

So is the unfolding public-debt crisis in Gambia, which has suffered from all of these trends, a harbinger of things to come?

In mid-January the IMF announced it is considering a bailout for Gambia. In part, the problems of the tiny west African country of 2 million stem from a 60 percent fall in tourism, the source of 30 percent of its export earnings. (Although it has not suffered a single case of Ebola, it is close to Guinea, one of the most affected countries.)

Falling commodity prices mean exports of wood and nuts will also bring in less. No wonder the local currency, the dalasi, fell by 12 percent against the dollar last year.

A weak currency is a worry, since Gambians rely heavily on imported food. Two-thirds of the public debt is denominated in foreign currency. To prop up the dalasi, the central bank has raised interest rates from 12 percent to 22 percent over the past two years.

But it is mismanagement of the government's finances that has pushed Gambia over the edge. From 2009 to 2014 its debt-to-GDP ratio increased by 18 percentage points, more than all other countries in sub-Saharan Africa except Cape Verde and Ghana. Now 80 percent, it is one of the highest in the region. It is likely to increase further thanks to the latest budget, released in December, which boosts spending by 11 percent.

Gambia's debts are not just growing; they are of unusually short maturity. The cost of servicing them has therefore jumped very quickly as rates have risen. A rule of thumb favored by the IMF suggests that a poor country's debt is unsustainable when the government is devoting more than 20 percent of its revenue to paying it back. In 2009 Gambia devoted 15 percent of revenue to debt-service; in 2014, 23 percent. Forecasts from the Economist Intelligence Unit, a sister company of the Economist, put this year's figure higher still.

In June, Zambia, which has suffered from low copper prices, turned to the IMF. It was soon followed by Ghana, which devotes 36 percent of government revenue to debt-service. Malawi and Eritrea may be the next casualties: They have big deficits and must make hefty payments on the public debt every year.

Happily, debt problems like Gambia's are increasingly rare. Thanks to a series of debt-relief programs the continent's debt-to-GDP ratio is 38 percentage points lower than it was in 2000. At 30 percent, it is about one-third the level of the eurozone's. No sub-Saharan countries except Eritrea fall afoul of another indicator of imminent debt problems, when the ratio of debt-service to exports tops 20 percent (though these numbers are worsening, thanks to falling commodity prices). Budget deficits are lower than in 2009, the last time commodity prices dived and the dollar rose.

Most African currencies held up well in the past year, another sign that investors are not panicking. Times are tough, but only a few countries are really struggling.