Africa

Zambia

Debt sustainability in Zambia: mission impossible?

Zambia’s new administration has made encouraging noises about restoring macroeconomic stability and addressing the country’s public debt problem. But it will be a tall order to secure a large restructuring and stick to the fiscal consolidation that will be needed to leave the public debt ratio on an even keel.

2 December 2021

Omicron shines spotlight on low vaccine coverage

The emergence of the Omicron strain of COVID-19 reinforces the need to boost vaccine coverage in Sub-Saharan Africa from current low levels. Most countries have administered at least one vaccine dose to less than 20% of their populations. The South African authorities’ initial response to the ‘Omicron threat’ was to urge the take-up of vaccines, rather than tightening containment measures. And so long as vaccine coverage is low, the risk of intermittent curbs on activity to relieve strains in health care sectors will linger with future virus waves and variants. Achieving such vaccine coverage will probably take some time even as Africa’s vaccine supplies – including from China and India – look set to increase over the coming quarters.

30 November 2021

Headwinds beyond vaccine woes intensifying

Extremely low vaccine coverage continues to cast a dark cloud over recovery prospects in Sub-Saharan Africa and this will be compounded by deteriorations in the terms of trade and tighter fiscal policy. As a result, rebounds in most economies will lag behind other EMs. Sovereign debt risks look acute in Ethiopia and are growing in Ghana, while South Africa faces a slow-burning problem.

27 October 2021
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Debt data disclosures, SA fiscal buffer evaporating

Reports suggesting that many developing countries, including some in Africa, have larger external debts to China than officially reported reinforce concerns about a lack of transparency. At the very least, debt restructuring talks will get tougher. Meanwhile, in South Africa, the public finances have almost certainly taken a turn for the worse since the rosy outturn in the second quarter.

Debt restructuring talks inching forward

The threat of messy outcomes to Sub-Saharan Africa’s debt problems seems to have diminished recently. In Zambia, the new administration vowed to tackle debt problems and press on with restructuring talks under the G20’s Common Framework. And Ethiopia, another participant in the programme, held its first creditor meeting as a political crisis reignited debt concerns. Even so, debt restructuring negotiations will not be smooth sailing, especially following recent revelations that Zambia’s debt owed to China may be substantially larger than officially reported. And elsewhere, debt problems may come back to bite down the line. While immediate risks in South Africa and Ghana are low, policymakers will need to undertake large fiscal consolidation to stabilise public debt-to-GDP ratios.

Good and bad news from SA, Tanzania gets IMF support

Data this week showed that South Africa recorded robust GDP growth in Q2, but there was little time to celebrate as a slump in manufacturing output in July has raised the risk of a contraction over Q3. Elsewhere, Tanzania secured financing from the IMF this in a further sign of good start by the new president, Samia Suluhu Hassan. Finally, the sharp fall in the birr this year drove Ethiopia’s inflation rate to 30.4% y/y in August. Currency weakness and the growing threat of an all-out civil war have increased the risk of a sovereign default.
CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.

Zambia’s new president off to a good start, SOEs in SA

Zambia’s newly elected president has wasted no time to push to restore macroeconomic stability, and reassure investors. But recent concerns about hidden debts could pose a risk to the debt restructuring process. In South Africa, reports suggest that the authorities are adopting a harder line on state-owned enterprise bailouts, but we think that it will be a case of not all SOEs being created equal.

BIG a non-starter, rand on the rocks, Hichilema hired

The South African authorities appear to be devoting increased attention to the idea of a permanent basic income grant (“BIG”) but, in practice, such proposals are probably dead on arrival. Meanwhile, the sell-off in the South African rand has gathered pace this week and we think that the currency has further to fall. Finally, the election of Hakainde Hichilema as Zambia’s next president has been embraced by investors. While it looks like he will adopt more prudent policies than his predecessor, we think these will only pay off in the long-run.

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