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IMF, Kenya seal staff-level agreement, recommends fiscal consolidation

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The International Monetary Fund (IMF) and Kenya struck a staff-level agreement on Tuesday, according to the multilateral body, opening the door to the payment of roughly $976 million.

The fund stated that it would have instant access to $120 million provided its Executive Board approved a second review of Kenya’s Resilience and Sustainability Facility.

Additionally, the lender recommended the East African country to modify its 2024–2025 budget to incorporate more measures aimed at increasing income, given that a decline in the primary fiscal balance during the preceding fiscal year and a shortfall in tax collections were anticipated to maintain high domestic borrowing needs.

Kenya has struggled with cash since 2022, but in February it was able to partially repurchase another Eurobond that is expiring in June by selling a new $1.5 billion Eurobond from international markets, albeit at a hefty price.

The shilling strengthened versus the dollar as a result of the issuance, which also allayed investor fears about a possible default and restored trust in the economy among foreign investors. The fund suggested that making changes to the budget for 2024–2025 could help.

“Authorities have taken decisive steps towards fiscal consolidation by introducing several measures in the context of the draft 2024/25 Budget and the 2024 Finance Bill,” it added.

On Thursday, the finance minister will provide the parliament the budget for 2024–2025 (July–June). Parliament approved 4 trillion shillings ($31 billion) for the year’s total spending, which is more than the 3.75 trillion shillings the minister had given in June of last year for the 2023–2024 fiscal year. Later on, the budget was changed to 3.85 trillion shillings.

The Finance Bill 2024, a separate law including revenue-raising recommendations that some claim might bankrupt industries like financial services, transportation, manufacturing, and retail, will be introduced with the 2024–2025 budget.

The current $3.6 billion IMF agreement with Kenya was reached in April 2021. This evaluation is the seventh that the program has conducted.

Kenya will utilize a portion of a $1.2 billion World Bank budget support loan to pay around $500 million toward a maturing Eurobond this month, according to the central bank governor’s announcement last week.

VenturesNow

As inflation slows down, Angolan central bank maintains stable interest rate

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The central bank of Angola maintained its main interest rate at 19.5% on Friday, noting a possible short-term improvement in the supply of necessities and a possible decrease in inflation.

To contain growing inflation, which has reached 30%, the Bank of Angola hiked its main rate by 50 basis points at its most recent monetary policy meeting in May after raising it by 100 basis points in March.

The annual inflation rate increased last month, from 30.16% in May to 31.00%, although at a slower rate than in prior months.

“The decision (on Friday) was motivated by the prospect of a slowdown in the rate of price growth and an improvement in the supply of essential goods,” said Central Bank Governor Manuel Tiago Dias.

“If current conditions prevail from August onwards, we predict a slowdown in year-on-year inflation,” Tiago Dias added.

Since the middle of last year, inflation has been increasing in the nation that produces oil in Africa.

By September, the central bank will make its next move on monetary policy.

 

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Bean disease affects 81% of major cocoa region in Ghana

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The International Cocoa Organisation (ICCO) reports that 81% of a significant cocoa-producing region in Ghana, the second-largest cocoa grower in the world, is affected by swollen shoot disease.

Due to unfavourable weather and disease in leading cocoa-producing countries, Ghana and Ivory Coast, prices for the ingredient used in chocolate have nearly doubled this year.

However, expectations are growing for better production the following season. About 60% of the cocoa produced worldwide is produced by the two nations combined.

 

The data on bean disease in Ghana’s Western North, the country’s third-largest cocoa-producing region by output, cast doubt on hopes for a production rebound partly because they show how severe the outbreak is still.

Usually, within a few years, the swollen shoot virus first lowers yields before killing trees. Cocoa cannot be replanted until the sick trees are removed and the soil is treated.

The ICCO reports that 330,456 hectares of Ghana’s 410,229-hectare Western North region are contaminated. The intergovernmental agency was using information from Ghana’s cocoa sector regulator, Cocobod, through its Cocoa Health and Extension Division (CHED).

 

At an industry gathering in April, Joseph Aidoo, the chief executive of that industry regulator, said Reuters that 500,000 hectares nationwide—or 25.7% of Ghana’s 1.94 million hectares of cocoa-growing land—were afflicted.

He claimed that an additional 100,000 hectares are unproductive because of old trees and that the nation has already treated an additional 100,000 hectares, opening a new tab for swollen shoot. Replanted trees require two to four years to reach maturity and yield beans following rehabilitation.

 

“Swollen shoot is a serious problem that’s not improved in the last 12 months and is not going away,” said Steve Wateridge, a veteran world expert on cocoa and head of research at Tropical Research Services by Expana.

The Ivory Coast’s authorities have been more cautious about disclosing the full scope of the outbreak to the public, but the ICCO said that swollen shoot is also spreading there. Wateridge previously informed Reuters that the infection probably affected up to 30% of Ivorian cocoa plants.

Ghana usually produces more than 800,000 tons of cocoa annually, but due to smuggling, disease, aged trees, illegal gold mining, and climate change, it is predicted to produce just over half that amount this season.

 

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