There is also the issue of moral hazard for the IMF, which, in positioning itself as a backstop, can be accused of encouraging reckless behaviour - both by rich-country lenders who know they will be bailed out, and by governments who fail to live within their means or wean their economies off commodities. The cost of refinancing through more global bond issuance is also rising, as shown by the hefty 9.375 percent interest rate Zambia had to pay when it sold a $1.25 billion bond in July. Zambian finance minister Alexander Chikwanda told Reuters this week he would prefer not to have to go to the IMF for help - like Ghana, the southern African copper producer faces an election next year - but his options are narrowing.Īs with Ghana, domestic yields are as high as 24 percent and since Chinese growth has cooled, leaders from Zimbabwe’s Robert Mugabe to Angola’s Jose Eduardo dos Santos have found Beijing to be an increasingly reluctant lender. Overall, Fitch says African sovereign debt levels have risen to 44 percent of GDP from 34 percent five years ago, with Zambia and Kenya - which are running budget deficits approaching 10 percent of output - looking particularly vulnerable. It is now around 4, meaning the government is in effect servicing a loan equivalent to $3 billion. When it launched its debut bond in 2007 with an 8.5 percent interest rate, the cedi was virtually at parity with the dollar. ![]() Ghana’s central bank governor Henry Kofi Wampah dismissed the levels of debt - half of it in dollars - as “not very dangerous” but most analysts disagree, mainly due to the decline in the West African nation’s currency. This compares to 50 percent in 2005, the year anti-poverty campaigners Bono and Bob Geldof persuaded rich countries to write off billions of dollars owed by Ghana and other African nations. Since then, Accra has issued two more bonds of $1 billion each, helping pushing total public debt to 71 percent of gross domestic product (GDP), according to data published this week. Top of the list of ‘at risk’ countries, according to experts, is Ghana, the first African sovereign after South Africa to go to the international markets when it launched a debut $750 million Eurobond in 2007. interest rates set to rise soon, the inevitably higher borrowing costs will do little to alleviate pressure on creaking state budgets. Some are looking to issue more Eurobonds to refinance existing foreign currency loans, but with U.S.
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