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Zambia edges closer to debt restructuring under G20 framework

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Zambia is about to pull itself out of default more than three and a half years after legally declaring bankruptcy. The Southern African country is set to become the first country to finish a comprehensive overhaul under the G20-led ‘Common Framework’ framework on Tuesday when its foreign bondholders approve their share of a $13.4 billion debt restructuring.

The development will leave richer countries with some sobering insights into the effectiveness of their much-heralded debt relief plan.

 

The head of the International Monetary Fund (IMF), Kristalina Georgieva, has praised it as a significant indication of international cooperation, while Zambia’s president, Hakainde Hichilema, has already called it a historic occasion. However, it will be more of a wearying cheer than a joyous fist shake for many involved in the daily work—and many delays.

“It was painful for Zambia – we fully recognise that,” William Roos, the co-chair of both the ‘Paris Club’ of richer Western creditor nations and of Zambia’s Official Creditor Committee that included Zambia’s biggest lender China, said at a debt conference in Paris on Friday.

“So we have to improve. But we delivered.”

According to estimates, Zambia’s debt will be restructured to save over 900 million dollars and its future payments will be spread out over a considerably longer period. However, its prominence has come from its service as a Common Framework test subject.

The G20 framework provides for the temporary suspension of debt service payments from the poorest countries (73 low- and lower-middle-income countries) by their bilateral official creditors. The Framework was created to unify all the many lenders to developing nations under one roof, especially China, whose lending surged in the ten years before the pandemic. It was introduced during COVID-19 in 2020.

Although it was hailed as a breakthrough, criticism of the delays and complexity has arisen from the unusually long period Zambia’s reorganization has taken, as well as those still proceeding in Ghana and Ethiopia. All three nations’ officials and creditors have expressed dissatisfaction with the lack of transparency.

A government and IMF-approved agreement with private sector bondholders was temporarily derailed in November by the official creditor group, led by China and France, because it did not offer sufficient debt relief. Tensions had already surfaced when China demanded that the large multilateral development banks led by the West also absorb losses.

“The G20 framework… I do not think I want to recommend that to any country,” Ghana’s central bank governor, Ernest Addison, said at the same event Paris Club co-chair Roos was speaking at when asked about his country’s experiences.’

 

As part of the agreement, creditors in the official sector in Zambia would renegotiate loans totalling $6.3 billion, and three of the nation’s major bonds, valued at a combined $3 billion, will be consolidated into two with modified terms and payment schedules. There are still some small banks and other loans that need to be adjusted.

Zambia, Africa’s second-largest copper producer, may have to make additional payments if it recovers quickly, according to stipulations included in the new agreements, as noted by former IMF General Counsel Sean Hagan and expert in sovereign debt Brad Setser. But those extra payments might raise its debt to the point where the IMF declares it highly vulnerable to debt trouble once more.

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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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