Development Finance International
6 February - IMF Grants USD 100m Debt Relief to Ebola-Hit Countries
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”.
Details of this new mechanism can be found in the IMF’s press release and an analysis by Jubilee Debt Campaign is available here.
3 February - Is Africa Facing a Sovereign Debt Crisis?
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.
14-22 January 2015 - Reform Plan Mission in Sudan
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.
19 December - African Development Report 2014
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.
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16 December - GSW commissioned to study financial absorption in the WASH sector for WaterAid
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.
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