Just weeks away from publishing its much-anticipated master plan for the struggling power sector, the government is considering prescribing financial assets and forcing pension funds and banks to invest in state utilities’ debt as an alternative to seeking IMF support. However, the government’s intention to renew nuclear power capability may be more considered and economically prudent than previous nuclear procurement plans.
The central bank has taken drastic action to nearly halve the number of lenders putting at risk more than USD 1.6 billion in deposits to at least 70,000 investors. However, the action will prompt much-needed consolidation in Ghana’s over-crowded banking sector as lenders brace for the impact of more payment delays in the power sector.
The key parties in Cote d’Ivoire are realigning ahead of the presidential vote in 2020, injecting some much-needed competition into the country’s political sphere that has been dominated for the past 8 years by President Ouattara. However, if the incumbent decides to run for a third term, he is likely to face a backlash of ethnic and identity politics from united opposition parties that would increase the risk of violence and commercial disruption, although a repeat of the 2010-11 civil war is unlikely.
Falling output in the farming sector is mostly due to disastrous state interventionist policies orchestrated by the current government. Lower revenues from the agricultural sector will add stress to the government’s fiscal balance, while also posing heightened risk of default and bankruptcy within the local banking sector.
Despite concerns that independent power producers will cut off supplies over sizable arrears owed by state agencies, the government will continue to intervene to ensure a stable supply of power. However, a secondary effect of the arrears is impacting fuel importers who already face heightened government non-payment risk. The viability of future LNG imports may also be threatened as import bills face long delays and cumbersome disputes.
President Adama Barrow is promoting symbolic measures such as a new look for its local currency note to purchase political capital ahead of 2021 elections as his own coalition unravels over second term ambitions. Progress on political and security sector reform has been slow and the truth commission’s performance has been heavily criticised. Yet eventual oil production would offer an economic boon and improve the country’s ability to service its debts.
An ongoing mining contract review is motivated by a need to raise state revenues from the sector to support the government’s debt servicing and higher social development spending that was promised in the last election campaign. The review also supports the government’s crackdown on corruption associated with the previous government and a current trend to disfavour Chinese partnerships. If implemented prudently, the review may stimulate future investment by strengthening institutions, while improving transparency and accountability.
Mainstream parties will have a competitive advantage at presidential elections in five weeks, although the real political battle will focus on the parliamentary vote in October. Whoever wins the elections, the current IMF programme is likely to remain in place. Benefits from the loan programme are starting to show as inflation slows in recent months and the government issues new bonds to finance its budget deficit.
The embattled central bank has for now ruled out an outreach to the IMF despite weak growth, a plummeting currency, and rising debt. The government will need to make progress on restructuring public companies, attracting investment, and retaining its only investment grade credit rating, while also battling its political opponents that seek the ouster of President Ramaphosa by 2022.
One of Africa’s most successful economies and the country hosting next year’s Intra-African Trade Fair is itself struggling to secure access to markets due to arbitrary border closures and Ebola containment measures. A growing trade deficit may mean Rwanda will have to borrow more to fund its current budget, while bilateral disputes risk escalating into military conflict.
- SOUTH AFRICA: CONSIDERING FINANCIAL ASSET PRESCRIPTION TO BAIL OUT THE POWER SECTOR
- SPECIAL REPORT: THE STATE OF AFRICA’S STATE-OWNED ENTERPRISES
- GHANA: CENTRAL BANK MAKES DRASTIC INTERVENTION TO PROMPT BANK CONSOLIDATION
- COTE D’IVOIRE: SPECTER OF IDENTITY POLITICS RETURNS AHEAD OF 2020 ELECTIONS
- TANZANIA: FALLING FARM SECTOR OUTPUT POSES CONTAGION RISK TO BANKING SECTOR