While the South African economy is again stuck in a deep recession and measures aimed at fiscal consolidation are stalled, the new administration may have achieved sufficiently firm institutional gains to stave off a third sovereign credit rating downgrade by Moody’s in October.
Western donors are suspending budgetary support to Zambia’s government due to concerns over financial mismanagement, thus straining debt servicing ability and casting into doubt ongoing project finance deals.
In the first six months of its administration, the new government had taken a measured and pragmatic approach to pursue internal and external peace, enhanced political pluralism, and economic privatisation, yet remains challenged by both socio-political and institutional pressures.
The ongoing contract frustration experienced by telecoms firm MTN in Nigeria and the threat of punitive action against banks such as HSBC are highly indicative of intensifying populist and politically motivated rhetoric against foreign investors ahead of next year’s elections.
The newly elected president has consolidated his political authority through shaking up the cabinet, while he is sending a reformist message to creditors that he will prioritise growth as a mechanism for development, beginning with measures to stabilise the country’s precarious fiscal and monetary positions.
A booming economy and improved governance are creating fresh opportunities for project finance deals. While the economic and financial outlook is relatively strong, there are emerging concerns over political patronage and contract discrimination under the current administration.
Desperately searching for fresh funds to service its mounting debt burden, the cash-strapped government has stopped paying public salaries and repaying VAT rebates to mining firms, while offering state assets as collateral for new loans.
Acute divisions between the reformist treasury and central bank and a populist legislature over a fuel tax and interest rate cap are imperilling the extension of the IMF’s standby credit facility. The government will try to balance the need to fulfil the IMF’s demands while also averting a popular backlash.
The new government will seek international re-engagement, political conciliation, and economic recovery, while taking a measured approach, prioritising less disruptive policy, and personnel changes and gradually moving toward more comprehensive change.
One year into its administration, Angola’s new government turns to the IMF seeking a three-year extended facility that will test the boundaries of its reformist credentials and potentially boost the country’s investment reputation.
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