In response to the 2014 Ebola epidemic, the IMF announced it is cancelling almost USD 100 million of debt payments from Guinea, Liberia and Sierra Leone who will use the funds to cover the cost of servicing their debt. The IMF is therefore establishing a new Catastrophe Containment and Relief Window (CCRW), a relief trust which will provide grants to countries suffering epidemics and other natural disasters. It urges other lenders to Guinea, Liberia and Sierra Leone to take similar action to ease financial burden.
While this move has been largely welcomed, concerns were raised about the announcement by the Fund to also offer the West African states $160 million of new loans, which will seemingly increase debt payments in the 2020s. According to Jubilee Debt Campaign, “the debt of Guinea, Liberia and Sierra Leone to the IMF will increase from $410m to $620m over the next three years, because of the $415m of new loans granted before the announcement”.
New research by ODI claims that the irresponsible use of sovereign bonds is jeopardizing sub-Saharan African economies by creating boom and bust cycles, a situation echoing the 1990s’ Asian financial crisis.
Highlighting the popularity of sovereign bonds in many low and middle-income countries, the study claims that using US Dollar as transaction currency threatens the countries’ ability to honour their repayments to investors because their own local currency has significantly depreciated in 2014. According to the research, this exchange rate risk of sovereign bonds issued by governments in sub-Saharan Africa in 2013 and 2014 is threatening losses of USD 10.8 billion.
The paper is split in two parts: Part I gives an overview of the current situation of sovereign bonds issued in sub-Saharan Africa. Part II considers the risks associated with sovereign bonds and their prevalence today.
A joint World Bank / DRI mission visited Khartoum, Sudan during the month of January, 2015. The objective of the mission was to develop a reform plan on debt management, and its recommendations were structured around three main areas: institutional framework, developing the domestic market, and operational risk. The mission prepared a project that will be submitted for peer review and then to the Sudanese authorities for comments. It is anticipated that the final report will be completed by March 2015.
The African Development Bank has released the 2014 edition of its African Development Report. Launched in the Bank’s new headquarters in Abidjan, Côte d’Ivoire, this new installment focuses on the theme of “Regional integration at the service of inclusive growth".
Since the independence decade of the 1960s, regional integration has played an essential role in the continent’s development and this report aims to discuss its relevance, 50 years later, in a changed and globalised world.
In six chapters, this publication makes a critical examination of the developments over the last five decades in terms of economic and political integration by exploring the importance and role of regional economic communities; the impact of regional infrastructure; the implications of the interregional migration of factors of production; regional financial integration and the platforms required to raise its impact on regional commerce and economic growth; and how best to link Africa to global production and trade through regional value chains.Read more...
GSW is currently working on a piece of research on behalf of WaterAid to carry out an analysis of financial absorption in the water and sanitation sector. The study aims to shed more light on the paradox of why high levels of water and sanitation poverty and an under-resourced sector can co-exist with available but unused funds. Budget tracking studies of the water and sanitation sector reveal that budget execution rates for many developing countries are significantly lower than the allocations available at the beginning of the financial year.
The reasons for low financial absorption can vary considerably, and may include weak human resource capacity and skills at different stages of the delivery chain, high transaction costs caused by fragmented donor activity, the slow pace of fiscal decentralisation, or an inappropriate mix of recurrent and capital funding.Read more...
DFI assisted New Rules for Global Finance to organise two recent events in New York and Washington DC. The first was a public panel in Washington, sponsored by the Heinrich Boell Foundation, in which representatives of the US government, developing countries and civil society examined Turkey’s agenda for its Presidency of the G20 in 2015, where Senegal spoke on Francophone countries’ priorities.
The second was a side-panel during the FfD events in New York, on Public-Private Financing Partnerships, at which Senegal presented its experiences of PPPs, together with representatives of the World Bank, civil society and the private sector. For more details of both events, consult New Rules’ website.
DFI will partner with the Overseas Development Institute (ODI) in organising a conference financed by the Gates Foundation, to be held in Accra in March 2015. The conference will help to prepare the UN Financing for Development conference in Addis Ababa in July.
DFI’s role will be to help mobilise senior developing country policymakers, and to organise plenary and technical sessions where senior developing country officials explain their financing strategies, as well as role-playing sessions demonstrating the complexities of mobilising suitable financing. DFI participated in the recent CAPE conference at ODI on 12-13 November during which preparatory meetings were held for the Accra conference.
DFI assisted the Organisation Internationale de la Francophonie to prepare with the participation of several Francophone developing country participants in the opening informal sessions of the Financing for Development (FfD) negotiations in New York, which will culminate in the FfD Conference to be held in Addis Ababa on 13-16 July 2015. Ministers and officials from the Democratic Republic of Congo and Senegal spoke on debt relief, partnerships for development and international and domestic tax policy.
DFI will be funded by the Swiss State Secretariat for Economic Cooperation (SECO) to provide debt strategy assistance to the Government of Sudan. The assistance will consist of two missions and two workshops, reinforcing Sudan’s debt management institutions, training officials in debt strategy analysis techniques, and producing a strategy document to guide Sudan’s potential progress in clearing debt arrears, moving through HIPC and MDRI debt relief, and mobilising longer-term financing for its development.
DFI helped to facilitate a seminar and conference on the IMF and World Bank, run by the Bretton Woods Project and the Observatoire Tunisien de l’Economie (OTE), for around 50 government officials, parliamentarians, civil society and the media. DFI spoke on IMF technical assistance, IMF and World Bank transparency, and the role of the IMF and World Bank in social spending and social protection. For details of DFI’s interventions, please contact DFI.
The ILO has published the World Social Protection Report 2014 -2015 which highlights the importance of more investment in social protection in order to overcome inequality, tackle extreme poverty and foster more inclusive growth. The report uses some of Government Spending Watch (GSW) data to show how much some countries are spending on social protection, drawing conclusions that financing is currently insufficient to expand coverage to all. This reflects GSW's own analysis of social protection spending.
This ILO study gives a great overview of what each country has been doing on social protection over recent years which builds into an excellent global picture and overview of social protection systems and policy. It reviews social protection for children, women and men in working age, older persons, and reports on progress towards achieving universal health coverage. It also analyses recent trends, such as the impact of austerity programmes in the aftermath of the financial crisis. Read GSW’s view on this report and the caveats related to gathering social protection data in this blog by GSW Programme Manager Jo Walker.