10 African countries with the lowest foreign exchange reserves

The forex crisis has already dealt a blow to many economies on the continent. For example, we recently reported that foreign airlines operating in Nigeria are struggling to repatriate their revenues due to the country’s inability to raise funds for them. Along the same lines, other companies in West African countries are struggling to raise dollars to facilitate essential imports.

In Kenya, many businesses are also struggling due to the scarcity of the dollar. Over the past few months, the Kenya Association of Manufacturers (KAM) has repeatedly expressed concerns about the economic risks posed by the growing shortage of dollars in the country. The situation is so bad that the Central Bank of Kenya (CBK) recently ordered commercial banks to ration dollar sales. And the implication of that is that not everyone who needs the currency can get it.

Remember, Nigeria and Kenya are among the best economies in Africa. A previous Business Insider Africa article ranked them among the 10 African countries with the largest foreign exchange reserves. Now, if countries with the largest foreign exchange reserves face forex-related difficulties, imagine how much worse the situation would be for countries with low foreign exchange reserves.

The rest of this article will focus on the African countries with the lowest foreign exchange reserves. But first, let’s briefly explain what the exchange entails.

What are foreign exchange reserves?

According to Investopedia, foreign exchange reserves are generally dollar-denominated assets that are held in reserve by central banks.

The International Monetary Fund (IMF) also defines foreign exchange reserves as the “foreign assets of the official public sector which are readily available and controlled by the monetary authorities, for the direct financing of payment imbalances, and which directly regulate the size of these imbalances, by intervening in the foreign exchange markets to influence the exchange rate and/or for other purposes.

The constitutions of various African countries require their central banks to maintain external assets in the following forms: gold bars or coins, short-term foreign treasury bills, bonds, IMF special drawing rights, account balances in foreign banks, etc.

Each of these assets must possess a basic characteristic of liquidity and can easily be converted into dollars, pounds sterling, euros or other similar hard currencies.

Importance of foreign exchange reserves

  • Foreign exchange reserves are necessary to influence the monetary policies of countries.
  • Foreign exchange reserves serve as emergency funds just in case a country’s currency devalues ​​drastically.
  • It is a source of economic prestige, as countries with high foreign exchange reserves are respected for their strong economic position.
  • Countries with good foreign exchange reserves tend to attract viable foreign trade and investment opportunities.

Here are the 10 African countries with the lowest foreign exchange reserves

  1. Somalia has foreign exchange reserves of $23.1 million.
  2. Equatorial Guinea has foreign exchange reserves of $40.8 million.
  3. Sao Tome and Principe has foreign exchange reserves of $75.2 million.
  4. Sudan has foreign exchange reserves of $177.9 million.
  5. south sudan has foreign exchange reserves of $183.6 million.
  6. Burundii has foreign exchange reserves of $266.1 million.
  7. Chad has foreign exchange reserves of $310 million.
  8. Comoros has foreign exchange reserves of $329.6 million.
  9. Central African Republic has foreign exchange reserves of $350 million.
  10. Liberia has foreign exchange reserves of $538.5 million.