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Zambia

Debt problems building

Sub-Saharan Africa’s recovery is likely to remain slow going and our growth forecasts are generally below the consensus. While spillovers from the war in Ukraine will boost a handful of economies – notably Angola and Nigeria – in others, the fallout will cause economic pain. High inflation is likely to prompt monetary policymakers across the region to hike interest rates, although we think South Africa’s central bank will do so more gradually than most currently expect. Meanwhile, public debt problems will grow. Risks are highest in Ethiopia and Ghana, while South Africa faces a slow-burning problem. EM Drop-In (5th May, 10:00 EDT/15:00 BST): Join Shilan Shah for our latest monthly session on the big macro and markets stories in EMs. This month, Shilan and the team will be talking Russian gas, FX weakness and surging food prices. Register now

4 May 2022

War in Ukraine: a varied impact across Africa

Spillovers from the war in Ukraine will have a varied impact across Sub-Saharan Africa. Large oil producers such as Nigeria and Angola are benefitting from the surge in global oil prices but, for the rest of the region, it is worsening their terms of trade. That is a cause for concern for countries already running large current account deficits, such as Kenya, particularly given that external financing conditions have tightened at the same time. The Ghanaian cedi has been a notable casualty among African currencies, further fuelling concerns about its fragile public finances. Meanwhile, with higher commodity prices adding to inflation pressures and the Fed turning more hawkish, central banks may tighten monetary policy more quickly.

31 March 2022

Assessing public debt risks in Africa

In this Update, we roll out our sovereign debt heat map that provides a snapshot of debt risks across Sub-Saharan Africa. The pandemic has increased debt burdens across the continent and, with elections on the horizon in many places, governments are unlikely to push through the austerity needed to stabilise debt. While the rise in commodity prices caused by the war in Ukraine is a positive for some (e.g. Angola), tighter external financing conditions pose significant risks for others (e.g. Ghana). Long Run Outlook Drop-In (23 March, 11:00 EDT/15:00 GMT): What will be the lasting impacts of the war in Ukraine? What legacies will the pandemic leave? What does a future of higher inflation mean for economies and markets? Neil Shearing hosts this special discussion with senior economists about the long-term investing outlook on Wednesday. Register here.

21 March 2022
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Sovereign debt risks becoming more acute

Sovereign dollar bond spreads have widened significantly in several Frontiers over the past couple of months, driven largely by country-specific factors. There are reasons to be hopeful that outright sovereign defaults can be avoided in Ukraine and Ghana, at least for now. The bigger threat of near-term defaults lies in Sri Lanka and Tunisia.

Region to lag behind as debt risks mount

Sub-Saharan Africa’s economic recovery from the pandemic is likely to remain one of the weakest of any region over 2022-23 and our GDP growth forecasts are generally below the consensus. The latest virus waves already seem to be ebbing, but low vaccination rates will keep much of the region vulnerable to possible future outbreaks. In the meantime, lower commodity prices and fiscal austerity will hold back growth. Despite tight fiscal policy, public debt risks will continue to mount in much of the region.

Emerging virus waves clouding recoveries beyond SA

Much attention has been devoted to the Omicron-fuelled fourth COVID-19 wave ripping through South Africa but cases have picked up elsewhere in Sub-Saharan Africa as well, with especially sharp rises in Nigeria and Namibia. There are early signs of virus waves taking hold in Kenya and Ghana too. But so far African policymakers are following their peers in South Africa with a “wait and see” approach before tightening economically-damaging restrictions on activity. Were healthcare systems to come under strain, governments’ hands may be forced and past form suggests that stringent containment measures pose the biggest risk to economic recoveries in Kenya, Rwanda and Uganda. Meanwhile, tourism-dependent economies will probably suffer either way. Even if travel restrictions are rowed back, any green shoots in tourism sectors are likely to wither amid virus concerns. Note: Central Bank Drop-In – The Fed, ECB and BoE are just some of the key central bank decisions expected in this packed week of meetings. Neil Shearing and a special panel of our chief economists will sift through the outcomes on Thursday, 16th December at 11:00 ET/16:00 GMT and discuss the monetary policy outlook for 2022.

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.

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.

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