African na­tions strug­gling to re­pay debts – re­port

The Star (Kenya) - - News Business - MERCY GAKII @TheS­tarKenya

African na­tions’ abil­ity to re­pay for­eign debt is shrink­ing due to fall­ing commodity prices, a ris­ing dol­lar and higher in­ter­est pay­ments, a UN paper sug­gests.

The re­port, how­ever, shows no neg­a­tive devel­op­ment with Kenya, cor­rob­o­rat­ing an In­ter­na­tional Mone­tary Fund re­port this week that Kenya was jus­ti­fied in ex­pand­ing its fis­cal deficit.

IMF re­vised down its 2016 growth fore­cast for Sub-Sa­ha­ran Africa to 1.4 from three per cent in May, as many Sub Sa­ha­ran Africa economies reel from the drop in commodity prices.

The “Assess­ing Re­cent Deter­mi­nants of Bor­row­ing Costs in Sub-Sa­ha­ran Africa” paper will be re­leased in Novem­ber. It says, in part, that the lat­est round of bor­row­ing among Sub-Sa­hara Africa na­tions goes back to 2006 when Sey­chelles is­sued a sov­er­eign bond.

Since then, 13 other na­tions in­clud­ing Kenya, An­gola, the Demo­cratic Repub­lic of Congo, Côte d’Ivoire, Ethiopia, Gabon, Ghana, Namibia, Nigeria, Rwanda, Sene­gal, Tan­za­nia and Zam­bia, have ac­cu­mu­lated more than $25 bil­lion (Sh2.5 tril­lion) worth of bonds, with a prin­ci­pal amount of more than $35 bil­lion (Sh3.5 tril­lion).

Since 2000, hedge funds have been the main plain­tiff in 75 per cent of all lit­i­ga­tion cases against sov­er­eign debtors, ac­cord­ing to the re­port.

“Sov­er­eign na­tions do not have the pro­tec­tion of bank­ruptcy laws to re­struc­ture or de­lay their debt re­pay­ments in the same way that pri­vate debtors can,” UNCTAD sec­re­tary gen­eral Mukhisa Ki­tuyi said on Wed­nes­day.

The paper adds that lack of di­ver­si­fied eco­nomic struc­tures and the re­sult­ing lack of real com­pet­i­tive­ness on the in­ter­na­tional mar­ket are among the rea­sons most coun­tries are run­ning into debt re­pay­ment prob­lems.

“But while cred­i­tors can­not eas­ily seize non-com­mer­cial pub­lic as­sets, sov­er­eign debt faults bring ma­jor prob­lems in terms of rep­u­ta­tion and ac­cess to fur­ther loans,” Ki­tuyi said.

The IMF re­port shows African eco­nomic growth was more than five per cent in the decade lead­ing up to the commodity price drop, but it is now be­ing dragged lower by 23 re­source-de­pen­dent na­tions like Nigeria, South Africa and An­gola.

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