• Monday, March 04, 2024
businessday logo

BusinessDay

Africa’s 10 most indebted countries

Africa’s 10 most indebted countries

Many African countries continue to struggle with escalating debt levels, posing substantial challenges to their economic well-being and development prospects.

The debt-to-GDP ratio is a direct measure comparing a nation’s total debt to its economic production, expressed as a percentage. A low ratio signifies economic stability, indicating that the country generates ample income to cover its debts, while a high ratio suggests potential challenges in meeting debt obligations.

Global investors frequently factor in a nation’s debt-to-GDP ratio when making investment decisions, favoring lower ratios for their attractiveness due to reduced default risk, potentially leading to lower interest rates on government bonds.

According to the International Monetary Fund (IMF), Here are Africa’s top 10 indebted countries

Cabo Verde (109.7% Debt-to-GDP Ratio)

Cabo Verde, a small island nation off the coast of West Africa, finds itself at the top of the list with a debt-to-GDP ratio of 109.7%. The tourism-dependent nation has been severely impacted by the COVID-19 pandemic, leading to increased borrowing to sustain its economy. The government faces the delicate task of balancing economic recovery with managing its soaring debt.

Mozambique (92.4% Debt-to-GDP Ratio)

Mozambique, plagued by a debt crisis since 2016, maintains a debt-to-GDP ratio of 92.4%. Despite efforts to restructure its debt and implement economic reforms, Mozambique remains entangled in a cycle of fiscal challenges, hindered by global economic uncertainties and domestic hurdles.

Congo Republic (91% Debt-to-GDP Ratio)

The Congo Republic has accumulated a debt-to-GDP ratio of 91%, primarily driven by its dependence on oil exports. Volatile oil prices and the need for economic diversification pose considerable challenges, necessitating strategic policy interventions to ensure fiscal stability.

Sierra Leone (82.6% Debt-to-GDP Ratio)

Sierra Leone’s debt burden has surged to 82.6%, reflecting the challenges faced by this West African nation in post-conflict recovery and development. The government faces the formidable challenge of managing debt while investing in critical sectors to foster sustainable economic growth.

Ghana (81.5% Debt-to-GDP Ratio)

Ghana once hailed for its economic progress, Ghana now faces an 81.5% debt-to-GDP ratio. High fiscal deficits and external debt contribute to the nation’s economic challenges, emphasizing the need for prudent fiscal policies to mitigate risks and ensure stability.

Mauritius (78.9% Debt-to-GDP Ratio)

Mauritius, a financial and tourism hub, grapples with a debt-to-GDP ratio of 78.9%. The island nation must strike a delicate balance between sustaining economic growth and addressing its rising debt levels to secure long-term fiscal stability.

Malawi (77.4% Debt-to-GDP Ratio)

Despite making strides in economic development, Malawi faces a debt-to-GDP ratio of 77.4%. Addressing this challenge requires a multi-faceted approach, combining prudent fiscal management with investments in critical sectors for sustainable growth.

Angola (77.1% Debt-to-GDP Ratio)

Angola, heavily reliant on oil, contends with a debt-to-GDP ratio of 77.1%. The country faces the challenge of economic diversification and effective debt management to withstand oil price fluctuations and build a resilient financial future.

South Africa (75.8% Debt-to-GDP Ratio)

South Africa, one of the continent’s economic powerhouse, is not immune to the debt predicament with a 75.8% debt-to-GDP ratio. Structural issues, political uncertainties, and the lingering effects of the pandemic necessitate coordinated efforts to stabilize the economy.

Senegal (72.1% Debt-to-GDP Ratio) and Rwanda (72.1% Debt-to-GDP Ratio)

Senegal and Rwanda share a 72.1% debt-to-GDP ratio, emphasizing the challenges faced by these nations in pursuit of economic development. While Senegal grapples with infrastructure financing, Rwanda focuses on balancing debt with its ambitious development goals.