Fresh political pressures on the peace process coincide with the commencement of commercial diamond extractions, raising renewed concerns over political instability and contract frustration in the mining sector.
The condition of President Bongo remains clouded in uncertainty, even though a political transition is likely to be underway which will ensure economic stability, yet much-needed reforms to the oil sector are likely to be stalled.
While the risk of a default remains relatively low into 2019, lack of progress on fiscal consolidation and slow-paced negotiations with the IMF pose a real threat of a sudden shock to Zambia’s financial stability, which would trigger a non-payment on loan conditions.
As the government steps up intimidation of its LGBT community, it risks the suspension of donor aid and a wider international backlash, which may well play into the president’s hands as he seeks to target foreign investments.
Investors have a growing appetite for Nigerian debt as the country ramps up foreign borrowing. We assess key indicators that will determine the debt outlook, including currency policy, local banking sector strength, and the post-elections economic climate.
The post-election climate has been brightened by a large hydropower investment and a positive economic outlook; however, the threat of insurgency, fragile debt sustainability, and lack of political succession planning will remain longer term threats to stability.
A political stand-off over cabinet appointments is expected to exacerbate the polarisation between partisan supporters ahead of the 2019 elections, while falling foreign reserves bode ill for import cover and debt servicing.
New revelations concerning public embezzlement, political intervention in the judiciary, overspending on military procurement, and public asset collateralisation are expected to frustrate any hope of a breakthrough during renewed talks with the IMF and motivate further donor aid cuts.
The government is failing to accomplish economic growth and fiscal consolidation, yet the prospect of post-electoral policy changes and broad institutional reform should be sufficient to stave off another credit ratings downgrade.
Both presidential campaigns are focussing on building broad-based local political coalitions to ensure victory in 2019, yet slowing investment and frustration of foreign investments are hampering the economic recovery and imperilling the local banking sector.
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