• York Investment & Finance

Global Markets Overview: Africa

By Rory Ellis, Analyst at the York IFS Global Market Telegraph

In this Africa’s report, we look at which countries have asked for debt relief, the IMF loan battle with Equatorial Guinea and how Kenya has fallen into a recession.

Ethiopia has become the latest African country to ask for debt relief under the G20 programme, following the economic impact of coronavirus.[1] The G20 initiative helps 73 of the world’s poorest countries to ask for debts to be restructured, and in the most serious cases, written off. The East-African country had been one of the fastest-growing economies before the pandemic hit and will be looking for borrowers to reach agreements on their debt with the help of private creditors, who may be reluctant to grant their wishes.

Shortly before the announcement, Chad also officially requested debt structuring, alongside support from the IMF. This is partly due to their liquidity crisis, with a high debt burden being hindered by low oil revenues, as people across the world continue to work from home.[2] Furthermore, this debt has been exhausted with a large debt from Glencore, correlating with weak oil sales.

After a long year of being promised an IMF bail-out, Equatorial Guinea has still yet to have received the $280 million loan. Following years of government corruption, the IMF has seemingly got cold feet over granting the money, with the country’s economy shrinking in the past six years.[3] Teodore Obiang and his family have ruled the country for decades, using the profits from the previous oil boom to extort bribes from businesses and waste millions of euros of state money for a construction project.[4] Despite concerns from NGO's amid the corruption, the IMF previously agreed to the loan and it remains to be seen whether they will follow through with their agreement.

Kenya has fallen into a recession for the first time in at least two decades, as their latest quarterly results have shown. Accommodation and food services, critical to the country’s thriving tourism sector, contracted by 58% — which is below the 83% it contracted in the second quarter.[5] With tourism — one of the key receipts of previous growth, the government will be hoping for positive vaccine news to help restore the economy. Despite the news, the East-African country has been boosted from a $17.5 million support package from Denmark to help support sustainable trade throughout the region. It is aimed at improving trading standards, sanitary issues and improving business competitiveness in the country.[6]

This article was first published in the University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 2 in late February 2021.

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Reference list:

[1] https://www.ft.com/content/4992e00e-557a-4c06-858b-e7e15bbf10ac

[2] https://www.theafricareport.com/62933/chad-1st-country-in-covid-era-toask-for-restructuring-of-its-debt/

[3] https://www.economist.com/middle-east-and-africa/2021/01/23/equatorial-guinea-is-still-waiting-for-its-imf-bail-out

[4] https://www.occrp.org/en/investigations/equatorial-guineas-oil-minister-allegedly-siphoned-off-millions-from-public-construction-project

[5] https://www.bloomberg.com/news/articles/2021-01-28/kenya-economy-slumps-into-recession-on-third-quarter-contraction

[6] https://www.the-star.co.ke/business/kenya/2021-02-03-denmark-commits-175m-to-support-trade-in-kenya-eac/


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