By Ishioma Emi
Before the year 2020, about 40 percent of sub-Saharan African countries were already in or at risk of a debt crisis. The region began to experience its worse economic crisis owing to variety of factors. Chief among these factors that has plunged the continent in a debt web is “overborrowing.” However a recent report further indicates that African countries face another debt crisis.
In the wake of the COVID-19 (coronavirus) pandemic, the region went on track for a record 3 percent economic contraction in 2020. According to the International Monetary Fund debt-to-GDP ratios have doubled over the last decade to 57 percent. Almost half of the developing countries in the world are in Africa and most developing countries in the world face a shortage of capital.
Ironically, there is a strong presumption that foreign savings can and should be utilized to augment the stock of capital over and above what could be provided by domestic saving, making the typical developing country a net foreign borrower. More so, a vast majority of African countries have not been able to generate a sufficient increase in output and in particular export earnings, to be able to meet their debt obligations.
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Source:: Ventures Africa