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Oxford Economics: Angola and Mozambique are the Portuguese-speaking African countries with the riskiest debt

The director of the emerging markets department at Oxford Economics considered that Angola and Mozambique are the Portuguese-speaking African countries most at risk of debt restructuring, which would be a very lengthy process.

: Andre P.
Andre P.  

In response to questions from Lusa, Gabriel Sterne said that "the two Portuguese-speaking African countries most at risk of a sovereign debt restructuring are Angola and Mozambique, despite both economies having been better due to the levels of production and price of oil and natural gas".

Speaking following a report analyzing the influence of competition between the International Monetary Fund and China on debt restructuring processes, Gabriel Sterne states that "both countries continue to have a high risk of sovereign over-indebtedness, with rates interest rates [for debt issues] in international markets above 10 percent, which probably means it is too expensive for them to go to market."

Thus, he continues, "to go into 'default' [defaults on sovereign debt payments], all that is needed is for there to be one more negative shock to raw materials."

Sterne's analysis focuses on the differences between China and the IMF, not only in their approach, but also in the debt resolution mechanisms of the most indebted countries and the role of each of these actors in the future.

In recent years, China has become an unavoidable financial partner on the world stage, being one of the main investors in Africa and one of the largest creditors of African countries, which constitute a large part of the world's countries in over-indebtedness and having difficulties in serving debt and, at the same time, launch the public investments necessary to sustain development.

Official international creditors have criticized China's stance in not accepting losses or postponements of sovereign debt payments, in addition to the opacity of loan terms, the consequences of non-compliance, which can lead to the cutting of diplomatic relations, and the fact that China lends without demanding counterparts in terms of economic or political reforms.

The need for a new global architecture, defended by most financial actors, became more pressing following the economic crisis caused by the Covid-19 pandemic, which sank economies and was particularly hard on sub-Saharan African countries, removing them from give them even more budgetary room for maneuver.

The increase in public debt in these countries and the increasing involvement of the IMF in the region were two of the consequences, after a period in which debt relief measures such as the Debt Service Suspension Initiative (DSSI) or the Framework Commonly, they happened, but they were not enough in some cases, such as Zambia, the first country to enter into financial default following the pandemic.

Asked about the characteristics of the relationship between Angola and China, which is one of the largest creditors and buyers of Angolan oil, and how the 'war' for influence between China and the IMF could have an impact on Angola, Gabriel Sterne replied that "Angola is a This is a particularly interesting case, as it has the highest percentage of debt to China, in its total debt, worldwide, which means that the links between the two countries are deep”.

However, it also means that if there is a default, debt relief from China would necessarily have to be part of the solution, which in turn means that any such process will take a long time to resolve," pointed.

For countries like Angola and Mozambique, with high debt levels in relation to revenues and in relation to the country's own Gross Domestic Product, the analyst defended the need to maintain control over public accounts and continue with reforms that attract international investors.

"The best thing, besides getting lucky with oil and gas prices, is to make an additional effort with cautious fiscal policy to build safety cushions, as a full-scale debt crisis would be very painful," he concluded.

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