Mounting concerns over Africa’s debt sustainability are frustrating key investment decisions and infrastructure financing. In this special report EXX Africa identifies the countries in best and worst position to attract further debt.
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 deployment of the military to curb militant activities of a powerful Somali paramilitary force poses higher risk of retaliatory attacks on Oromo commercial assets, such as oil infrastructure, and railway lines that run through the Somali region.
A lasting peace agreement would improve Ethiopia’s access to ports and boost forex revenues, while Eritrea’s economy would recover as UN sanctions are dropped; yet such scenarios are unlikely as long as there is no firm deal on border demarcation and troop withdrawal.
Last weekend’s attack on a political mass rally underlines the resistance to the new government’s liberalizing economic reforms and its diplomatic outreach to old foe Eritrea that imperil Ethiopia’s entrenched security establishment and established patronage structures.
A cash injection by Ethiopia’s Gulf allies will ease immediate hard currency shortages, yet there remain longer term concerns over lack of currency reform and a reluctance to extend privatisations to the banking sector.
Ethiopia’s olive branch for Eritrea has provoked both its military and Tigray population, while Eritrea seems reluctant to participate in talks to end a war footing that underpins its government’s legitimacy.
The government has begun an ambitious economic and foreign policy shift that will need to be matched by troop withdrawals from disputed Eritrean territory and broader privatisations across key economic sectors to impact foreign currency shortages and falling export revenues.
The end of the state of emergency is more due to the new prime minister’s successful co-opting of Tigray leaders and threatening of Tigrayan commercial interests, rather than a lasting improvement in the security climate.
As foreign currency debt issuance reaches a new record so far this year, there are growing concerns over debt servicing sustainability, while several African economies are at serious risk of debt distress.
- EXX Africa director Robert Besseling moderated a panel on Africa’s commodity rollercoaster at GTR Commodities in Geneva hosted by Global Trade Review (GTR)
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