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Swiss and UK watchdogs quiz Credit Suisse over Mozambique loans

7 June 2016 Comments (0) Africa, Business

ZURICH (Reuters) – Switzerland’s financial watchdog said it is in touch with Credit Suisse over Mozambique’s undeclared loans, while Britain’s regulator is also making inquiries, according to a source familiar with the situation.

In April, Mozambique, one of the world’s poorest countries, disclosed as much as $1.35 billion of sovereign borrowing that may have made its debt unsustainable.

Swiss bank Credit Suisse and Russia’s VTB have been active in Mozambique, arranging loans for state-owned firms as well as helping with a eurobond issue.

A spokesman for Swiss financial watchdog FINMA told Reuters on Tuesday it was in contact with Credit Suisse over its engagement with the sub-Saharan African nation.

“We are aware of the issue and are in contact with the bank over this matter,” he said on Tuesday, declining to give any further details.

Separately, a source told Reuters on Monday that the UK’s Financial Conduct Authority (FCA), was looking into the role both Credit Suisse and VTB played.

Credit Suisse declined comment.

VTB said it had been open and transparent with the regulator on the Mozambique transaction and was not aware of any investigations.

“As we previously said, the total public debt number disclosed in the prospectus of the issued sovereign eurobond was inclusive of all outstanding direct and publicly guaranteed government debt, as confirmed to us by Ministry of Finance of Mozambique,” the Russian bank said.

Mozambique’s foreign debt – including $2 billion of commercial borrowing arranged without consulting parliament as required – has ballooned in the last four years, largely due to expectations it was set to become a major natural gas producer.

However, those expectations are now being shown to be wildly premature, leaving the country with a foreign debt burden equal to $400 per head – only a fraction below the International Monetary Fund’s $435 annual per capita GDP estimate.

 

(Reporting by Joshua Franklin and Oliver Hirt in Zurich, Alexander Winning in Moscow and Ed Cropley in Luanda; Editing by Michael Shields and Alexander Smith)

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African governments seek bailouts as commodity prices fall

19 May 2016 Comments (0) Africa, Featured, Politics

angola imf

Angola is the latest nation to seek an aid package from the International Monetary Fund as its oil-dominated economy falters.

As its economy buckles under the weight of falling oil prices, Angola is turning to the International Monetary Fund (IMF) for a bailout.

By one estimate, the West African nation faces a shortfall of $8 billion, or 9 percent of its gross domestic product, this year. Angola last borrowed from the IMF in 2009.

Angola is one of several cash-strapped African countries that are turning to the IMF for financial help as prices drop for commodities such as oil and minerals.

Ghana agreed to an aid package in 2015, it’s first from the IMF in six years. Zambia is also in talks for IMF aid, which would be its first since 2008. Zimbabwe has also asked the IMF for its first loan in nearly two decades.

Meanwhile, the IMF stopped a $55 million loan to Mozambique – part of a bailout approved last year – after discovering the country had failed to report $1 billion in unreported loans it owes.

South Africa and Nigeria may also be forced to turn to the IMF as their economies struggle.

Angola faces shortfall

Angola’s request was an about-face after the nation repeatedly said it would not turn to the IMF for help in the current crisis because the aid would come with too many conditions.

But the country’s reserves have fallen as oil prices stayed below $45 a barrel and the government is reluctant to cut services in advance of elections in 2017.

Oil accounts for 95 percent of Angola’s exports and about half of the government’s revenue. In addition to slumping oil revenues, the country has suffered a retrenchment by China, which has its own economic problems.

Monetary agency requires transparency

In exchange for IMF aid, the Angolan government is likely to be forced to be more transparent about its financial dealings as the international agency typically scrutinizes the finances of countries it assists.

One criticism of Angola’s economy is the extent to which it is controlled by President José Eduardo dos Santos, who has ruled the country for more than three decades. While nearly half of the country’s population subsists on just over $1 per day, dos Santos’ daughter, Isabel dos Santos, is the richest woman in Africa, raising questions about the source of her wealth. Isabel dos Santos has denied using state money to enrich herself.

“The IMF stands ready to help Angola address the economic challenges it is currently facing by supporting a comprehensive policy package to accelerate the diversification of the economy, while safeguarding macroeconomic and financial stability,” Min Zhu, IMF deputy managing director, said in a statement.

One expert urged caution. Ricardo Soares de Oliveira, an Angola expert at Oxford University, noted that a study in 2011 by IMF staff found that the government could not account for $32 billion between 2007 and 2010.

“The IMF should use the leverage it has to extract serious concessions and tangible reforms from the government,” de Oliveira said.

Ghana receives bailout

Angola is the not the only country turning the IMF.

Ghana, an oil and gold producer, received a three-year, $918 million bailout in 2015. The country saw the value of its crude exports cut in half between 2014 and 2015, falling to $1.5 million in the first three quarters of last year as both prices and demand fell. Gold exports fell by nearly one third to $2.4 million.

In December, the IMF also agreed to a $283 bailout loan package for Mozambique that required the southern African nation to disclose all of its borrowing. In April, the IMF said it stopped a disbursement of $55 million after learning the country had not reported millions in loans by Credit Suisse Group and the Russian VTB Group.

Mozambique, a natural gas producer, saw exports fall by 14 percent in 2015.

Zambia, Africa’s second largest copper producer, saw a shortfall of 8 percent of gross domestic product in 2015 and is also seeking IMF assistance in 2016. Zimbabwe also expects an IMF loan in the third quarter of this year.

In addition to the IMF aid, the World Bank said it expects to lend up to $25 billion this year to countries reeling from falling commodity prices.

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Congo to seek up to $500 million in budget support from World Bank

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

KINSHASA (Reuters) – Democratic Republic of Congo will seek between $250 million and $500 million in budgetary support from the World Bank this year, pending a review of its economy by the International Monetary Fund next month, the government said on Tuesday.

Africa’s leading copper producer has been hit hard by a fall in commodity prices since last year. This month the government proposed a 22 percent reduction in the 2016 budget and cut its annual growth forecast to 6.6 percent from 9 percent.

It also announced on Monday that it would scale back the size of a planned international bond issue to finance infrastructure projects to 256 billion francs from 653 billion francs ($686 million).

The support would allow the central bank to boost its foreign currency reserves, which have fallen from $1.48 billion at the end of 2015 to $1.2 billion this week due to a slowdown in exports, said Vincent Ngonga, a deputy chief of staff to the prime minister.

After years of exchange rate stability, a lower supply of dollars has heaped pressure on the franc, causing it to lose more than 2.5 percent of its value against the dollar this year.

“The advantage of budgetary support is that it affects the reserves because, once you have the support, it’s in dollars,” Ngonga said. “The reserves increase but the revenues of the state increase too.”

However, the negotiations with the World Bank can only begin if the IMF certifies Congo’s conformity with governance and macroeconomic standards during a visit next month, he added.

The IMF called off a $530 million loan programme in 2012 after the government failed to provide sufficient details on the cession of mining assets by state miner Gecamines to a company based in the British Virgin Islands.

Ngonga said it was not clear when the government could expect to receive the first tranche of support. The World Bank’s office in Congo was not immediately available for comment.

Ngonga said the government would also seek budgetary support from the African Development Bank (AfDB) but said that too depended on the IMF’s blessing. The AfDB was also not immediately available for comment.

 

(By Aaron Ross. Editing by Matthew Mpoke Bigg and Gareth Jones)

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Lafarge Africa to market $302 mil bond to refinance loans

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

LAGOS (Reuters) – Lafarge Africa is in the middle of a roadshow to market a 60 billion naira ($302 million) bond programme to refinance loans at United Company of Nigeria (UNICEM), which it acquired last year, its finance chief said on Thursday.

“We are in the process of restructuring the UNICEM debt. We are in the middle of a roadshow,” Lafarge Africa Chief Finance Officer Anders Kristiansson told an analysts call.

“We want to refinance the U.S. dollar borrowings that we have in UNICEM.”

($1 = 198.55 naira)

 

(Reporting by Chijioke Ohuocha; Editing by Alexander Smith)

 

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