Public Debt in African States

This is from the IMF:

Screen Shot 2018-11-23 at 10.27.45 AMCountries in sub-Saharan Africa accumulated external debt at a faster pace than low- and middle- income countries in other regions in 2017: the combined external debt stock rose 15.5 percent from the previous year to $535 billion. Much of this increase was driven by a sharp rise in borrowing by two of the region’s largest economies, Nigeria and South Africa, where the external debt stock rose 29 percent and 21 percent respectively.

Export growth is not keeping up with rising levels of external debt:

….In 2017, the ratio was largely unchanged from the prior year, at an average of 138 percent. However, this ratio was close to double the average of 70 percent in 2010. Moreover, the average ratio masks wide disparity between countries. At the end of 2017 54 percent of countries in the region had an external debt-to-export ratio over 150 percent, as compared to 28 percent of countries in 2010 and the number of countries where the ratio surpassed 200 percent more than doubled, from 6 countries to 14 countries, over the same period. Most of these countries are ones that benefitted from HIPC and MDRI relief, including Burundi, Ethiopia, Niger, Senegal and Tanzania.

Bond issuance is dominated by a handful of countries:

Bond issuance by sovereign governments and pub- lic-sector entities in the region rose to $27 billion in 2017, a more than fourfold increase over 2016, driven to a large extent by a surge in issuance in South Africa to $19 billion from $4 billion in 2016, 70 percent of bond issuance in the region last year. An important factor was non-resident purchase of bonds issued in the South African domestic market. Bond issuance by other countries in the region totaled $8 billion, a tenfold increase from 2016, reflecting continued investors’ confidence and search for yield. Issuing countries in 2017 were Nigeria ($4.8 billion), Cote d’Ivoire ($2 billion), Senegal ($1.1 billion), and Gabon ($0.2 billion). Nigeria’s $3 billion Eurobond issuance marked the country’s largest such operation to date, and at end 2017, bond issuance accounted for one third of the country’s outstanding external debt.

Overall, while the data suggests that things may not be as bad as they were over the lost long decade (1980-1995), the trends are not encouraging. Total reserves as a share of external debt peaked around 2010 and have been in decline since. Screen Shot 2018-11-23 at 10.54.37 AM

Kenya trade fact of the day

This is from the prospectus issued by the Kenyan Treasury ahead of its $2b eurobond issue in late February.

Africa is the largest market for Kenya’s exports, accounting for 40.7 per cent. of total exports in 2016, and 37.7 per cent. in the nine months ended 30 September 2017. The Common Market for Eastern and Southern Africa (“COMESA”) remained the dominant destination of exports, accounting for approximately 72.5 per cent. of the total exports to Africa and 30 per cent. of total exports in 2016.

The European Union continues to be Kenya’s second largest export market, accounting for 21.0 per cent. of total exports in 2016 and 21.6 per cent. in the nine months ended 30 September 2017. Exports to the European Union declined by 3.7 per cent. in 2016, with exports from the United Kingdom and Germany, two of the top three destinations of Kenya’s exports within the European Union, declining by 7.6 per cent. and 5.2 per cent., respectively, in the same period. In addition, a large portion of foreign tourists visiting Kenya are from Italy, Germany, the United States and the United Kingdom, which accounted for a combined 38.2 per cent. of departing tourists in 2016.

A decline in demand for exports to Kenya’s major trading partners, such as the European Union or COMESA countries, or a decline in tourism receipts, could have a material adverse impact on Kenya’s balance of payments and economy.

Over the last five years intra-Africa trade as a share of total trade in the region has risen from less than 12% to about 18%. With the implementation of the African Continental Free Trade Area this figure will jump to over 25%, and will likely grow faster over the next four decades as the African population explodes to over 2 billion people.

Read the while thing here.

Former HIPC countries are back in the red

The Journal reports:

Mozambique was one of the biggest benefactors of debt forgiveness, with its debt slashed from 86% of gross domestic product in 2005 to 9% the next year. The country has built it back up since then to 61% of GDP.

Ghana’s debt was 82% of GDP in 2005 just before the international community forgave about half of it. It’s now up to 73% of GDP and growing, according to the IMF.

The burgeoning debt burdens are putting more pressure on African budgets. The cost of servicing Ghana’s debt will consume nearly 40% of government revenue this year, according to an analysis by Fitch Ratings — twice what is considered sustainable under the rule of thumb used by the IMF and many analysts.

More on this here and here and here.

Spring break reading list

I just finished reading Daniel Branch’s Defeating Mau Mau, Creating Kenya. It is an excellent blend of an academic take on theories of violence and counterinsurgency and a historical narrative of Kenya’s war of independence (as I was taught in primary school) or the “Kikuyu civil war” (which is a lot closer to the truth). The book sheds light on the foundations and dynamics of the Mau Mau rebellion and dispels previous accounts which argue that the cleavages that defined the war (Mau Mau vs. loyalist) was primarily class-based and existed before the onset of the rebellion in 1952. I highly recommend the book for the readers interested in Kenyan history or COIN, or violence and civil war.

I also currently reading William Reno’s Warfare in Independent Africa, an account of the evolution of the nature of civil wars in Africa and the type of leaders that led them. Reno groups Africa’s rebel groups into anti-colonial rebels (e.g. FRELIMO), majority-rule rebels (a southern African animal, e.g. SWAPO), reform rebels (who fight against oppressive regimes, e.g. RPF, EPLF, etc) parochial rebels (who fight for circumscribed community rights e.g. OPC in Nigeria) and warlord rebels (e.g. LURD, NPLF, etc).

The book gives an account of how the socioeconomic origins of rebel leaders and the wider political context in which they operated influenced the trajectories of conflict in African states over time.  It also attempts to tackle the question of why most African rebels (even those from Ruritania) have tended to fight for the capital instead of secession, even in states with limited capacity like the DRC (this is however changing, Sudan, Somalia, and Mali are good examples). If you had lingering questions after reading Jeremy Weinstein’s Inside Rebellion (on the industrial organization of rebel movements) then this is a good book for you to read.

Lastly, I finally took Debt, The First 5000 Years by David Graeber off the shelf. Graeber is an anarchist anthropologist who was one of the brains behind the Occupy movement. I took his last Intro to Cultural Anthropology class at Yale before he got fired. Graeber sometimes goes into the deep end, but his ideas are refreshingly provocative. I look forward to reading it and availing my comments soon.

Also need to get my hands on this book when it comes out.