The debt threshold in the developing world, especially sub-Saharan Africa has skyrocketed over the last decade exacerbated by different circumstances.

With both the internal and external debt accumulation over the years, some measures like the benefits from the debt relief under the Highly Indebted Poor Countries (HIPC) program initiated by the world bank and the International Monetary Fund (IMF) offered relief although it comes with conditions like sound economic management and poverty reduction strategies which have their negative effects on these countries.

Currently, " Twenty two countries," according to IMF "are either in debt distress or at a high risk of debt distress like Malawi and Zambia. These governments are struggling to repay the loans they have incurred over the years. The whole of sub-Saharan Africa has a total debt of US dollars 702.4 billion in 2020 compared to US dollars 380.9 billion in 2012. This has almost doubled in a span of less than 10 years. It shows a trend that is not healthy for the economical welfare of these states.

"The debt to Gross Domestic Product (GDP) ratio for some sub-Saharan African countries has significantly passed the 45% threshold recommended by International Monetary Fund." According to IMF and World Bank's recent research, "Countries like Kenya, South Africa, Guinea Bissau, Eritrea, Ghana and Togo among others have debt totaling to more than 70% of their respective GDPs.

"Zambia is at a crisis with its debt equaling to its GDP." According to Zambian analyst Charity Musamba, "Zambia's debt stock is huge and strips the country's entire resources envelope." Debt, as much as it is meant for the good of all has brought along with it a lot of effects that are felt by the victims of careless borrowing and mismanagement by governments.

1Highest standards of living

The hike in commodity prices in these countries is due to measures put in place by governments to manage debt. Kenya, for example, in an aim to prevent its train-to-debt crisis, has decided to put in place measures to reduce its borrowing like increasing taxes and increasing commodity prices to cater for the deficit in the revenue.

Although it was meant for development goals like infrastructure, human capital, and climate change resilience, these are long-term goals and their effects must be felt immediately.

2Limit government freedom

Most creditors come with a lot of limitations and conditions that hinder any form of reform of policies among others. The IMF for instance is known for the imposition of Structural Adjustment Programs among third-world countries that have in some instances caused more harm than good. A country like Zimbabwe around the 1980s and 1990 was put into an economic crisis and slower GDP growth after adopting SAPs.

Disproportional budget austerity and other programs affected the country severely and the country's human capital development and public welfare investment led to mass unemployment and social unrest. This outcome forces the government to turn to more borrowing succumbing to the circle of borrowing.

Causes

1Natural disasters

A pandemic like covid 19 worsens the situation among African countries. The outbreak and spread of Coronavirus and its effects through loss of livelihoods, human resources, and loss of resources plus time pushes them into more debt.

To relieve the effects of the outbreak and other situations, they opt for more funding which does not favor the economic abilities of third-world countries.

2Wars

This can be within or among themselves and in some instances, outside in other parts of the world affecting countries that they are highly dependent on. An example of the war between Ukraine and Russia is putting a toll on commodity prices, especially wheat and gasoline. This strains the paying capacities of these nations and increases the debtors.

3Mismanagement

Poor or lack of transparency and accountability in the management and use of national debt leads to a lot of wastage. Facts being stated, mismanagement of national resources of any kind in developing world is not a phenomenon. Wastage and selfish accumulation have been big factors leading to debt.

States should, at the minimum, adopt comprehensive debt data disclosure requirements and borrowing procedures that guarantee transparency and accountability. Put in place good and effective governance that involves strengthening national debt management policies ie policies that clearly explain conditions to be accepted by debt managers in a country.

4Tips off investors

This is not healthy for any economy. Most politicians and governments take the borrowing road as it is the most favorable one. Enough resources to meet their promises without raising any taxes and what they forget is the risk the investors pay attention to.

When the debt is more than that 77%, according to the World Bank, investors get concerned as it indicates a country may not be able to service its loans leading to a crisis. When debt starts toppling over, investors will start demanding more interest for increased risk.

5Debt leads to more debt

This is a cycle that most third-world countries have found themselves in. Their inability to service their loans forces them to seek alternative loans, especially among rising lenders like China and Japan, to service their initial loans from World Bank and International Monetary Fund.

This leads to a vicious circle of debt being catalyzed by other challenges like wars, natural disasters, and management. In this regard, it's of essence for developing world to pay more attention to reformative techniques to salvage their economies from this inevitable demise.