Editor’s Note: April 29, 2019
Is Africa wasting its debt?
Kenya has secured $666m from China to build a new highway in the capital Nairobi and fund its Konza tech city project. The funding is a mix of concessional loans and partnerships with private companies.
The announcement was made during last week’s Belt and Road Forum in Beijing, and comes amid growing concerns about the country’s debt sustainability.
Kenya’s debt has more than doubled in the last six years, with debt service costs at around 30% of revenue. The IMF recently upgraded the country’s risk of debt distress from low to moderate.
The issue is not just rising debt, but what it’s used for.
Ideally debt funds infrastructure and development projects that drive long-term growth and investment. Borrowing to fund the Konza city project, a stalled Silicon Valley-style pipedream, is a waste.
Ill-conceived projects are just part of the problem.
Kenya is considering a $2bn Eurobond, in part to pay off existing debt. It’s the equivalent to using one credit card to pay off another.
The country is not alone in wasting debt – last November Nigeria issued a $2.86bn Eurobond just to fund its budget deficit.
With yields on African government debt rising, and public finances across the continent in dire straits, expect to see much more of this.
From The Continent
Nigeria and Saudi Arabia are planning to draft an MoU for a partnership in the oil and gas sector, including construction of a new refinery and investment into liquefied natural gas.This comes amid plans by Africa's biggest oil producer to boost output and refining capacity. More: Reuters
Up to 160,000 people in Mozambique have been affected by flooding caused by cyclone Kenneth, the second tropical storm to hit the country in as many months. The UN has warned the storm could bring twice as much rain as Idai, which left hundreds dead in March. More: Al Jazeera
The Daily Stat
The number of opposition candidates participating in parliamentary elections underway in Benin. More: BBC
The Global Perspective
The Abu Dhabi Fund for Development on Sunday announced plans to deposit $250m into Sudan’s central bank as part of support for the country, which is in the midst of a political and economic crisis. Last week Saudi Arabia and the UAE announced $3bn worth of aid for Sudan. More: The National
Japan’s government is setting up a trade insurance scheme to fully cover infrastructure-related exports and loans to Africa to promote more investment by Japanese companies.The move is part of efforts by Tokyo to shift away from its traditional emphasis on aid in Africa relations. More: Nikkei