Do financial crises lie in Africa’s future?
The likes of Zambia, Ethiopia, Rwanda, Kenya, Ghana, Senegal, and Ivory Coast have all issued foreign currency dominated sovereign bonds in recent years.
Ghana is one African nation with a history of debt crises (pdf), and also dating back to the 1980s (pdf). Tanzania was another offender, both current and past (pdf), and for a while a lot of lending to Africa dried up and that limited the number of possible debt crises. But now…?
Here is Amadou Sy at Brookings, telling us it is not yet time to worry. Here is the African Development Bank worrying a bit more than that:
Today, a third of African countries have debt to GDP ratios in excess of 40 percent. The outstanding sovereign debt for Africa as a whole increased 2.6 times between 2009Q2 and 2015Q2. In contrast, total debt in developing countries rose 2.3 times over the same period. The appreciation of the dollar has raised the nominal currency values of dollar denominated debts. Thus Africa’s outstanding bond debt is already 29 percent higher today in real terms than it would have been had the dollar remained at its March 2011 level…
Here is Andrew England at the FT:
A recent note by Fathom Consulting highlighted a 40 per cent year-on-year dip in Chinese imports from Africa for July. Martyn Davies, chief executive of Frontier Advisory, a group that specialises in Africa-China investment, says there is anecdotal evidence of an easing in Chinese activity on the continent. “The hurdle rates of Chinese sovereign wealth investment, or part sovereign wealth fund invested projects in Africa have been raised so the capital is more discerning and seeks greater profitability,” he says.
Here is my previous post on which countries are most likely to experience the next financial crises.