In the global economy, external reserves (or foreign exchange reserves) play a crucial role in determining the financial stability and economic health of a nation.
External reserves typically consist of foreign currencies, gold, and other financial assets held by a country’s central bank or monetary authority.
These reserves are essential for supporting a country’s currency, paying for imports, servicing debt, and intervening in the foreign exchange market to stabilize the economy.
While larger economies tend to accumulate vast reserves, many smaller and less developed countries face challenges in building and maintaining these reserves. In Africa, the gap between countries with high reserves and those with minimal reserves is stark.
According to Afreximbank Africa Trade Report Here, are the top 10 African countries with the smallest external reserves
1. São Tomé and Príncipe -0.1 billion USD
São Tomé and Príncipe, a small island nation in the Gulf of Guinea, has the lowest external reserves in Africa. With a population of just over 200,000, its economy is heavily dependent on agriculture, particularly cocoa. The country is known as ‘ Chocolate Island’ due its cocoa export. The limited scale of its economy restricts its ability to accumulate reserves, leaving it vulnerable to external shocks.
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2. Burundi- 0.1 billion USD
Burundi is one of the poorest countries in Africa, with a predominantly agrarian economy. The country’s political instability and recurring conflicts have hindered economic growth and foreign investment, resulting in low external reserves. Burundi’s economy is heavily reliant on international aid, and its reserves are barely enough to cover a few weeks of imports.
3. Sudan -0.2 billion USD
Despite being rich in natural resources, particularly oil, Sudan faces significant economic challenges due to decades of conflict, sanctions, and political instability. The secession of South Sudan in 2011 led to a major loss of oil revenue, further weakening the economy. With rising inflation and a shortage of foreign exchange, Sudan’s external reserves have remained critically low.
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4. Zimbabwe- 0.2 billion USD
Zimbabwe has long struggled with hyperinflation, economic mismanagement, and international sanctions. The collapse of its currency and a series of economic crises have severely depleted its foreign reserves. While the country has abundant natural resources, including gold and platinum.
5. Eritrea -0.2 billion USD
Eritrea’s tightly controlled economy and isolation from the global community have contributed to its low foreign reserves. The country, ruled by an authoritarian regime, has limited trade and foreign investment. Its reliance on remittances from the diaspora and mining activities has not been enough to accumulate significant reserves.
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6. Comoros -0.3 billion USD
An archipelago located in the Indian Ocean, Comoros faces economic challenges due to its geographic isolation, limited natural resources, and reliance on agriculture and fishing. Political instability has also hampered efforts to attract foreign investment. As a result, Comoros has one of the smallest foreign reserves in Africa, making its economy susceptible.
7. Malawi – 0.4 billion USD
Malawi is a small, landlocked country in Southern Africa that relies heavily on agriculture, particularly tobacco exports. However, erratic weather conditions, political instability, and limited industrialization have constrained its economic growth. These factors, coupled with a high import dependency, have left Malawi with minimal foreign reserves, making it vulnerable to economic disruptions.
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8. Central African Republic -0.5 billion USD
The Central African Republic (CAR) is one of the poorest countries in the world, struggling with political instability, armed conflicts, and weak infrastructure. Its economy is primarily reliant on subsistence agriculture, with little industrial or export capacity. The country’s external reserves are extremely low, insufficient to meet even basic economic needs, let alone support growth and development.
9. Niger -0.6 billion USD
Niger, a landlocked country in West Africa, has a low level of foreign reserves due to its heavy dependence on agriculture and mining, particularly uranium. The country’s economic growth is frequently disrupted by droughts and political instability. While foreign aid plays a key role in supporting its economy, Niger has struggled to build significant reserves, limiting its ability to respond to economic shocks.
10. Sierra Leone -0.6 billion USD
Sierra Leone is another West African country with limited foreign reserves. Despite its rich natural resources, including diamonds, the country has faced numerous challenges, such as the Ebola epidemic, civil war, and economic mismanagement. These factors, combined with low industrial development and heavy reliance on imports, have prevented Sierra Leone from accumulating meaningful foreign reserves.
