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.
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.
Ahead of next year’s elections, the government will maintain the political status quo and boost welfare spending in order to curb any outbreaks of unrest; yet falling foreign exchange reserves will determine longer term succession scenarios and pose a nascent threat to repayment schedules as debt balloons.
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.
Excessive public debt and mounting political pressures risk undermining Gambia’s ongoing transition and the government’s reform agenda, although a substantial foreign aid endowment has provided a much-needed windfall.
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- EXX Africa is in Hong Kong, speaking on opportunities for Asian investors in Africa at TXF Asia 2018
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- GABON: POLITICAL TRANSITION IS UNDERWAY TO SUCCEED AILING PRESIDENT
- SPECIAL REPORT: ZAMBIA’S ROAD TO DEFAULT