External borrowing serves as a pivotal resource for fostering growth and addressing financial shortfalls.
However, unmanaged debt accumulation poses significant risks, threatening economic stability across Africa, a concern outlined by the IMF.
This problem affects various nations, four of them Portuguese-speaking, with Cape Verde, Mozambique, Angola and São Tomé notably ranking high in debt levels.
Countries with earnings surpassing their debts exhibit fiscal sustainability and bolster investor trust, facing fewer economic hurdles during debt settlements.
On the contrary, a high debt-to-GDP ratio signifies potential financial turmoil, making nations prone to global market shifts and external shocks.
Such fiscal pressures can lead to severe restrictions during economic downturns, forcing governments to enforce austerity, reduce public expenditures, or seek international aid.
Spending proportionate to GDP has the potential to precipitate significant financial crises.
The International Monetary Fund identifies several African countries with substantial external debts.
Debt Challenges in Lusophone Africa And Beyond
Cape Verde tops the list with a 93.25% debt-to-GDP ratio, followed by Mozambique at 65.54%.
Rwanda ranks third with 60.19%, Angola fourth at 52.91%, and Lesotho fifth at 46.8%.
Other nations like Ghana, São Tomé and Príncipe, South Sudan, Benin, and Sierra Leone also feature prominently, highlighting a widespread challenge.
Cabo Verde’s and Mozambique’s economic narrative, characterized by its strategic efforts to manage this high indebtedness, reflects broader continental trends.
Careful fiscal management and strategic international cooperation are crucial as countries work towards sustainable economic health.
This approach is essential for building resilience in their economies.