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Zimbabwe economy ravaged by drought, needs bold reforms

4 May 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

HARARE (Reuters) – Zimbabwe’s economic difficulties have deepened after drought weakened agricultural production and disrupted hydro power generation and the southern African nation needs bold reforms, the International Monetary Fund said on Wednesday.

“Unless the country takes bold reforms, the economic difficulties will continue in (the) medium-term,” the fund said in a statement after a consultation with Zimbabwean officials.

 

(Reporting by MacDonald Dzirutwe; Writing by TJ Strydom; Editing by James Macharia)

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IMF sees sub-Saharan Africa growth near two-decade low in 2016

3 May 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Economic growth in sub-Saharan Africa will likely slow this year to its weakest in nearly two decades, hurt by a slump in commodity prices, the Ebola virus outbreak and drought, the IMF said on Tuesday.

In its African Economic Outlook, the Fund said the region would likely grow 3 percent this year – the lowest rate since 1999 – after expanding by 3.4 percent in 2015.

Growth was seen recovering to 4 percent next year, helped by a slight recovery in commodity prices, and the Fund said it was still optimistic about the region’s prospects in the longer term.

“However, to realise this potential, a substantial policy reset is critical in many cases,” the Fund said.

Affected countries needed to contain fiscal deficits as the reduction in revenue from the commodities sector was expected to persist, it added.

Major oil exporters Angola and Nigeria were hardest hit by the slump in commodities prices, as were Ghana, South Africa and Zambia, the report said.

Guinea, Liberia, and Sierra Leone were only gradually recovering from the Ebola epidemic, while several southern and eastern African countries including Ethiopia, Malawi and Zimbabwe were suffering from a severe drought, the IMF added.

On the upside, Côte d’Ivoire, Kenya and Senegal would see growth of more than 5 percent, mostly “supported by ongoing infrastructure investment efforts and strong private consumption,” the report said.

“The decline in oil prices has also helped these countries, though the windfall has tended to be smaller than expected, as exposure to the decline in other commodity prices and currency depreciations have partly offset the gains in many of them,” it added.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by Andrew Heavens)

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Mozambique says loans to state firms necessary for security

27 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

MAPUTO (Reuters) – Mozambique provided guarantees on loans to state firms Proindicus and Mozambique Asset Management to protect strategic national infrastructure and help maintain naval equipment, a government spokesman said.

The spokesman’s comment, in a statement, followed disclosure by the International Monetary Fund last week that Mozambique had admitted to having more than $1 billion of undisclosed debt and that the two parties were evaluating the implications of the disclosure.

Earlier, a source at the Fund had told Reuters that Proindicus, owned by the interior and defence ministries and the state security services, had been lent $504 million by Credit Suisse and $118 million by Russia’s VTB.

Another loan of $535 million had gone to Mozambique Asset Management, another state company set up to build a shipyard in the northern city of Pemba, that source said.

In his statement dated Tuesday but acquired by Reuters on Wednesday, spokesman Mouzinho Saide said the government had granted a $622 million loan guarantee to Proindicus in 2013, and $535 million to Mozambique Asset Management the following year.

“We faced security threats, such as piracy … illegal immigration, drug trafficking … and illegal fishing,” Saide said after a meeting of Mozambique’s cabinet.

He said the government had also been keen to ensure protection of the assets of oil and gas companies operating in Mozambique’s exclusive economic zone.

The loans are in addition to an $850 million ‘tuna bond’ issued in 2013 and restructured last month because the southeast African nation was struggling to meet repayments.

The IMF source said the extra borrowing had pushed Mozambique’s foreign debt to $9.64 billion, a level “very close to unsustainability”.

 

(Reporting by Manuel Mucari; Writing by Stella Mapenzauswa; Editing by Richard Balmforth)

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Zimbabwe to present new IMF financing programme by November

22 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

HARARE (Reuters) – Zimbabwe will present a financing programme to the International Monetary Fund by November this year after clearing its arrears, opening the door to receiving its first loan from the Fund in nearly two decades, the finance minister said on Friday.

Patrick Chinamasa told reporters that he was optimistic an IMF executive board meeting on May 2. would accept Zimbabwe’s plan to pay $110 million in arrears to the Fund.

Another $1.7 billion would then be paid to the African Development Bank and World Bank.

Zimbabwe has not received a loan from the IMF since 1999.

President Robert Mugabe agreed last month to major reforms, including compensation for evicted white farmers and a big reduction in public sector wages. Those reforms are expected to be part of a new financing programme.

“Between September and November Zimbabwe will work feverishly to come up with a new country financing programme, on the basis of which we hope, if we clear our arrears, we should get new financing,” Chinamasa said.

Reserve Bank of Zimbabwe governor John Mangudya said on March 16. he expects a loan from the IMF in the third quarter of this year, after paying off foreign lenders by the end of June.

 

(Reporting by MacDonald Dzirutwe; Editing by James Macharia)

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Investors want answers from Mozambique, banks over loan mystery

21 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LONDON (Reuters) – Investors holding Mozambique’s recently restructured ‘tuna bond’ are demanding answers from the government and its bankers over what the International Monetary Fund says are previously undisclosed loans that could exceed $1 billion.

The revelations have rocked the relationship between one of the world’s poorest countries and the International Monetary Fund (IMF), which last year agreed to lend Mozambique $286 million to cushion its economy following deep declines in commodity prices and the value of the metical currency.

Only last month investors met Mozambican officials and agreed to swap an outstanding $697 million of the dollar-denominated tuna bond, issued in 2013 by state-owned fishing-company Ematum, for a sovereign issue.

The deal was seen widely as investor friendly and accepted by holders representing more than 80 percent of the issue. Ratings agency Standard and Poor’s defined the restructuring as “tantamount to a default”.

The original $850 million bond has been controversial from the start: when it was launched, it was presented to investors as funding for “fishing infrastructure” but it quickly became apparent most of the cash was for defence.

Under IMF pressure, the government re-allocated $500 million of the debt to its defence budget. The subsequent bond rescheduling was part of efforts to clean up and rebuild trust for the southern African nation, under pressure from donors to improve the transparency of its finances.

However, last Friday the IMF said it believed Maputo borrowed $1 billion more than previously disclosed.

The Fund’s Africa Director, Antoinette Sayeh, said the additional loans appeared to have been borrowed from Credit Suisse and Russia’s VTB Bank and allocated to Mozambique’s defense and security sector.

Credit Suisse and VTB Bank were also joint dealer managers on the exchange offer launched in March. Mozambique’s Finance Minister Adriano Maleiane was quoted on Sunday saying the country had no hidden loans and that this was down to “some confusion”.

Investors say if found to be true, the IMF allegations could greatly damage the country’s reputation and ability to raise funds.

“At this stage, things are really up in the air until we hear from the various parties of what is really going on,” said one fund manager, who holds the bond but declined to be named. “If this is additional debt which was not included in the overall debt stock it completely changes the overall relationship with the international financial institutions’ community, the IMF, the donor community and it changes the market relationship. There is a lot of harm created in the short term.”

Details of the alleged new loans are sketchy and have not been disclosed in the prospectus to holders of the new bond issue.

However, a February 2013 Credit Suisse document obtained by Reuters outlines a $372 million loan to Proindicus, a company owned by the Ministries of Interior and Defence and the State Security and Intelligence Service. According to the document, the funds are to be spent on high-speed naval interceptors, radar stations, off-shore patrol vessels and aircraft. Credit Suisse declined to comment on the document.

The Ematum bond swap prospectus seen by Reuters also notes under “conflicts of interest” that the dealer managers may make loans or be involved in other transactions to Mozambique.

Marco Ruijer, portfolio manager at NN Investment Partners, who also holds the bond said he had addressed questions to Credit Suisse.

“It was perhaps not prudent of Credit Suisse to say we are doing restructuring to extend maturity from 2020 to 2023 when they themselves have a loan on the books which is maturing before 2023,” said Ruijer. “Now they get money back earlier than the bondholders.”

A Credit Suisse spokesman declined to comment on whether the bank had arranged loans for Mozambique in addition to the Ematum bond.

A source closed to VTB said the bank was assured by Mozambique’s finance ministry that all its financing had been disclosed to the IMF, and that the total debt spelled out in the prospectus included all outstanding direct and publicly guaranteed debt.

Mozambique has seen its foreign debt spiral in recent years. According to the restructuring prospectus, total foreign direct and government-guaranteed debt ballooned from $5.244 billion in 2012 – before the Ematum bond issue – to $9.637 billion in 2015. Combined with domestic debt of $1.5 billion, the government had obligations last year equivalent to 102 percent of GDP, the document said.

 

(By Karin Strohecker. Additional reporting by Sujata Rao in London, Ed Cropley in Johannesburg and Lidia Kelly in Moscow; Editing by Dominic Evans)

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Angola to open loan talks with IMF as oil price bites

6 April 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

LUANDA (Reuters) – Angola will begin loan negotiations with the International Monetary Fund (IMF) this month as lower oil prices hammer the finances of Africa’s second-largest crude exporter, the Finance Ministry said on Wednesday.

Angola’s economy has grown rapidly since a 27-year civil war ended in 2002, peaking at 12 percent three years ago, but a sharp drop in oil prices has sapped dollar inflows, dented the kwanza and prompted heavy government borrowing.

Oil output represents 40 percent of gross domestic product and more than 95 percent of foreign exchange revenue. Brent crude traded below $39 a barrel on Wednesday, down more than 30 percent compared with a year ago. [O/R]

“The government of Angola is aware that the high dependence of the oil sector represents vulnerability for the public finances and the economy in an extensive way,” the Finance Ministry said in a statement.

“The government requested the support of the IMF for a supplementary programme … taking account of the decline in the price of petroleum.”

Finance Minister Armando Manuel told Reuters in March that Angola had no plans to approach the IMF for loans.

Angola will work with the IMF to design reforms aimed at improving fiscal discipline, simplifying the tax system and increasing transparency in public finances and the banking sector, as part of loan talks, the ministry statement said.

It added that the focus of its economic diversification efforts will be growing the agriculture, fisheries and mining sectors.

The ministry said the government was also implementing an ambitious programme of fuel subsidy reforms to shore up the country’s finances.

 

(Reporting by Herculano Coroado; Writing by Joe Brock; Editing by Alison Williams)

 

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IMF to resume Malawi loan programme

24 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LILONGWE (Reuters) – The International Monetary Fund will resume Malawi’s $150 million extended facility programme which was suspended last year after a scandal involving abuse of state money, the country’s finance minister said on Thursday.

“The IMF has given us a green-light to the resumption of the programme which allows them to disburse about $30 million of the remainder of the total $150 million,” Goodall Gondwe told Reuters.

“The advice we get from the IMF is very important because they provide a very valuable yardstick of how we can manage our economy and we will continue doing well especially on public finance management so that we are not off track again.”

The IMF had suspended the programme following a scandal in which senior government officials siphoned millions of dollars from state coffers. Other international donors, led by Malawi’s former colonial ruler, Britain, also halted direct aid to the southern African nation over the scandal.

IMF Mission Chief Oral Williams said in a statement on Wednesday that Malawi had demonstrated a concerted effort to put the programme back on track, including improvements in public financial management.

Malawi has struggled to grow its economy due to declining export earnings from tobacco and in the absence of aid, which had previously accounted for 40 percent of its budget.

The IMF said it expects Malawi’s economy to grow by 3 to 4 percent this year after expanding by 3 percent in 2015.

But growth may be weather-dependent the Fund said, after an El Nino weather pattern triggered drought and heatwaves, threatening the staple maize and other crops.

 

(Reporting by Mabvuto Banda; Editing by Catherine Evans)

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Zimbabwe expects first IMF loan in nearly two decades this year

16 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

HARARE (Reuters) – Zimbabwe expects a loan from the International Monetary Fund(IMF) in the third quarter of this year, the first since 1999, after paying off foreign lenders by the end of June, the central bank governor said on Wednesday.

President Robert Mugabe’s government last week agreed to major reforms including compensation for evicted white farmers and a big reduction in public sector wages as the government tries to woo back international lenders.

Central bank governor John Mangudya said the IMF would decide the exact amount of the loan to issue at a later date. The fund had agreed to double the amount available for Zimbabwe, known as a financial quota, to $984 million, he said.

“We are talking about the third quarter, that’s when you see most of the action happening,” Mangudya told Reuters in an interview, referring to when Harare expected the loan.

Zimbabwe would also receive an $896 million loan from an unnamed country to pay off arrears to the World Bank.

In addition, the African Export-Import Bank would provide $601 million for Harare to clear arrears to the African Development Bank (AfDB).

Zimbabwe would then receive the same amount as a grant from the AfDB, Mangudya said.

The Southern African country’s foreign debt stands at $8.3 billion, of which $1.8 billion is arrears.

Zimbabwe is trying to emerge from years of international isolation, largely blamed on Mugabe’s policies, including the seizures of farms from white farmers.

The worst drought since 1992 has left 4 million Zimbabweans facing hunger.

Mangudya said the drought had forced the government to lower its growth target for 2016 to below 2 percent from 2.7 percent. The IMF and World Bank forecast growth of 1.4 percent and 1.5 percent respectively.

Once Zimbabwe clears its arrears, it would be ready for rating by international ratings agencies, with a view to issue international bonds in future, said Mangudya.

Mangudya said he supported the government’s decision to take over diamond mining in Marange because the government was receiving little money from the operations.

“After the rating we will then go for the Eurobonds and all to raise money on the international capital markets,” he said.

The government had issued $250 million in treasury bills to raise money for its operations in 2015, Mangudya said, adding that the bank would soon start holding public auctions of treasury bills to enhance transparency in state borrowing.

The central bank also issued $1 billion in bills last year to creditors of the bank, which owes $1.35 billion.

 

(By MacDonald Dzirutwe. Editing by James Macharia and Tom Heneghan)

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Kenya secures $1.5 bil IMF standby facilities in case of shocks

15 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – The International Monetary Fund (IMF) has approved two-year standby facilities for Kenya worth about $1.5 billion, which can be drawn on if the East African nation faces unforeseen shocks.

“The Kenyan authorities have indicated that they will continue to treat both arrangements as precautionary,” the IMF said in a statement issued late on Monday after the completion of discussions with Kenya on replacing existing facilities.

The funds comprise a standby arrangement worth about $990 million and a standby credit facility worth about $495 million.

The IMF said Kenya only intended to draw on them if it faced “exogenous shocks” that led to a balance of payments need.

The Central Bank of Kenya calmed volatility in the markets last year after hiking its benchmark lending rate by 3 percentage points to 11.50 percent. It has also increased foreign reserves without turning to the IMF standby loan.

So far this year, the shilling has been firm, appreciating by about 0.6 percent against the U.S. dollar. On March 10, reserves stood at $7.33 billion, the equivalent of 4.7 months import cover, up from $7.1 billion at the end of 2015.

“Kenya’s recent growth performance remains robust and the outlook is positive,” IMF Deputy Managing Director Min Zhu said in the statement.

At the end of last year, Kenya has estimated growth for 2015 at between 5.8 to 6.0 percent, lower than originally expected but still higher than the 2014 figure of 5.3 percent.

“Despite positive policy steps undertaken under the current Fund-supported program, the economy remains vulnerable to shocks, reflecting less favorable global financial market conditions, as well as continued security threats and potential extreme weather events,” the IMF deputy managing director said.

The IMF said cutting the budget deficit was a key step to contain risks, while still supporting major infrastructure projects and providing essential health and education needs.

Kenya’s budget deficit for the financial year 2015/16 ending on June 30 is forecast at 8.1 percent of gross domestic product, falling to 6.9 percent in 2016/17, draft Finance Ministry figures have shown. [nL8N15G1VC]

The East African nation has ramped up spending in recent years to build a modern railway, roads and electricity plants, driving up the deficit and unnerving investors.

 

(Reporting by Duncan Miriri and Edmund Blair; Editing by Richard Borsuk)

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IMF says in advanced talks with Tunisia over $2.8 bil credit

3 March 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

TUNIS (Reuters) – The International Monetary Fund and Tunisia are in the advanced stages of talks over a $2.8 billion credit over four years to help support the country’s economic reform programme, an IMF delegation said on Thursday.

A visiting IMF delegation said at the end of its mission that it would now focus on fine-tuning reform priorities and financing needs for this year.International lenders have been demanding Tunisia cut public spending, reduce deficits and introduce reforms that help create sustainable jobs and growth.

“Moving ahead with economic reform is crucial as the Tunisian economy confronts several significant challenges. Economic growth is held back by investors’ wait-and-see attitude and regional uncertainties,” the IMF said in a statement.

Five years after overthrowing autocrat Zine El Abidine Ben Ali and sweeping in democratic change, Tunisians are still struggling with an economy unable to deliver the jobs and reforms their revolution promised.

Three major militant attacks last year, including two on foreign visitors, have battered the tourism industry, while a week of rioting earlier this year has worried Western partners looking to help the North African state.

 

(Reporting by Tarek Amara; writing by Patrick Markey; Editing by Toby Chopra)

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