Browsing: Sovereign Debt

Return of the gold standard

Return of the gold standard: what African nations should do

Investing

African countries looking to anchor their currencies on either gold, or a combination of gold, precious metals, and other minerals would need to start with legislation which would make it legal for the governments of those countries to redeem paper currency with either those minerals or a derivative of those minerals.

Zimbabwe in late August began an initiative where it sold actual gold coins to its citizens which had been minted by that country’s central bank. This move was initiated to halt the slide of the currency on the parallel and official markets. This county’s policy so far has been successful in slowing down the trend of inflation which had begun to run amok.

It would be remiss to attribute the slowdown inflation to the gold coins. The country dramatically tightened its monetary policy by increasing interest rates to over 200 per cent in May 2022 and temporarily banned commercial…

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Eritrea Sovereign Debt & Economic Profile

Eritrea sovereign debt and economic profile

Countries

Eritrea’s debt stands at 175 per cent of its GDP.

This is very high for the agriculture-based economy.

Eritrea is an outlier on the African continent. Unfortunately for the Horn of Africa country, it is not for good reasons. The nation has held on to a counterproductive form of government which has retrogressed the country economically and kept its people in poverty.

The country maintains a political system which is largely autocratic in nature and is not a democracy by any stretch of the imagination. The country was at war with Ethiopia and only recently managed to broker a peace deal which is no more than a truce to fight another day.

  • Eritrea has a sovereign debt load that is nearly double the size of its GDP according to the World Bank and the IMF.
  • The country has an archaic system of governance and is for that reason a negative
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Cabo Verde sovereign debt and economic profile

Cabo Verde sovereign debt and economic profile

Countries

Cabo Verde is one of those countries one hardly gets to hear about.

The country is an archipelago of 10 islands off West Africa’s coast in the Atlantic Ocean. The country is fascinating economically and politically. According to the World Bank, “Cabo Verde is considered an example of democracy in Africa, much for its political stability.

Electoral processes have been held regularly, with peaceful alternation of power between the two major parties. The left-wing African Party for the Independence of Cabo Verde (PAICV), which headed colonial liberation, governed for two 15-year periods (1975-1991 and 2001-2016).

  • Cabo Verde is an exceptional country. It is exemplary. This accolade is because of the country’s stability both economically and politically. The country holds elections regularly and has peaceful transitions of power between the various players in its political matrix.
  • Cabo Verde has a population of 491,233 according to statistics from a census conducted in
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Solving the Sovereign Debt Crisis in Africa

Sovereign debt crisis solution: African countries trading more with each other

Countries

To have only 3 of the eligible countries in Africa signing up for the initiative is tragic especially given the global economic environment of the world presently. A crippling sovereign crisis is looming on the African horizon. Catalysts of the crisis include a strong United States dollar which has been resurgent during the year.

Debt on the on the books of most African countries is denominated in the greenback and its strength will have an adverse impact on their public finances and their ability to service their loan obligations timeously.

This problem is further compounded by rising interest rates which are certain to make the cost of debt that much more expensive for countries that already cannot afford to be overextended financially.

The debt of most African countries is in the hands of private creditors who in recent time have become as important as their multilateral counterparts. These private creditors…

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IMF warns British economic plan

IMF warns British economic plan

Countries

In terms of foreign exchange reserves, according to HM Treasury, Britain has net official reserves of US$ 114 billion whereas it plans to embark on an economic plan to pull itself out of the stagflation quagmire by spending no less than US$ 173 billion dollars. If Britain were to use all its foreign exchange reserves to meet the cost of its economic plan it would run short of money and still have a deficit of US$ 59 billion dollars before fully implementing its plan.

Fair enough and granted, governments do not always have to spend cash that they have on hand. They can always borrow if they do not have sufficient cash to finance their operations.

Herein is the problem, the current economic environment does not support borrowing either by individuals, households, or governments. The cost of borrowing is just simply too high either by domestic debt or foreign debt. …

Ghana sovereign debt crisis

Ghana sovereign debt crisis tip of African countries loan mess

Africa

Ghana’s case specifically plays out with the dramatic effect consistent with a Shakespearean tragedy. The west African nation ironically is a darling of the West in terms of foreign direct investment. Yet, its debt levels have breached what multilateral institutions consider to be sustainable. A painful irony in the case of Ghana is that it was offered the opportunity to renegotiate the terms of its debts through the World Bank’s Debt Service Suspension Initiative. However, Ghana did not elect to participate.

A second painful irony is that Ghana, this time around, does not owe most of its debts to multilateral institutions like the International Monetary Fund or the World Bank. It owes the bulk of its debt to private lenders like the world’s largest asset manager Black Rock, and its has expressed that it has no interest in renegotiating the terms of Ghana’s sovereign debt.

If Ghana had borrowed from …