A year of reckoning approaches, with 20 elections and a wall of over 10 bond redemptions due in 2024.
Since COVID-19, African economies have muddled through a series of internal and external shocks. While some moved swiftly to arrest the rut, others have done little to avert the corrosion of internal and external balances. Despite recent market improvements, the prospects of disorderly defaults and messy elections continue to linger for investors.
External shocks were again the dominant theme in 2022. Rising United States interest rates, Europe’s energy crisis and China’s zero-COVID-19 policy saw fears of stagnation dominate financial markets. A strong dollar, the continuation of the interest hiking path, and banking failures in the US and Switzerland in 2023 compounded financing constraints, with funding costs climbing significantly.
Yet, these countries’ experience has shown that even a multilateral framework backed by the International Monetary Fund and World Bank isn’t a silver bullet. In the two years since discussions began, Zambia and Ethiopia’s debt restructuring processes have been slow, weighed down by conflicting interests.
Senegal also finds itself wedged between a bond wall and a ballot train. West Africa’s bastion of stability has been shaken by violent unrest, with opposition leader Ousmane Sonko’s supporters claiming he’s being persecuted by President Macky Sall to clear the path for an unconstitutional third term. This portends a volatile period ahead of the 2024 elections and a US$200 million bond redemption next July.
The IMF, meanwhile, has taken a softer stance on reform requirements, especially when they threaten political stability. And Europe is mulling over lifelines for geostrategic states like Tunisia.
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