The director of the emerging markets department at Oxford Economics said Sunday that Angola and Mozambique are the Portuguese-speaking African countries most at risk of a debt restructuring, which would be a very lengthy process.
In response to questions from reporters, Gabriel Sterne said that “the two Lusophone African countries most at risk of a sovereign debt restructuring are Angola and Mozambique, despite the fact that both economies have been doing better due to the levels of production and price of oil and natural gas”.
Speaking following a report in which he analyzes the influence of competition between the International Monetary Fund and China on debt restructuring processes, Gabriel Sterne says that “both countries continue to have a high risk of sovereign over-indebtedness, with interest rates [for debt issues] on the international markets above 10%, which probably means that it is too expensive for them to go to the market”.
So,” he continues, “for them to default on their sovereign debt, there just needs 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 mechanisms for resolving the debts of the most indebted countries and the role of each of these players 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 make up a large part of the world’s over-indebted countries and which are struggling to service their debt and, at the same time, launch the public investments needed to sustain development.
Official international creditors have criticized China’s stance in not accepting losses or postponements of sovereign debt payments, coupled with the opacity of the loan terms, the consequences of default, which go as far as severing 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, advocated by most financial players, has become more pressing in the wake of the economic crisis caused by the Covid-19 pandemic, which has wrecked economies and hit sub-Saharan African countries particularly hard, taking away even more room for budgetary maneuver.