Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
At a gloomy IMF Spring meeting in foggy bottom, President
Trump's tariffs are putting more pressure on African economies trying
to negotiate new help from the fund. If you balance
your baja now, you loat offer services to the people,
and no one will accept to pay taxes if they're
not receiving services. While ghanem and Zambia have turned their
economies around with IMF help, Kenya, Mozambique and Senegal find
(00:33):
themselves having to try and negotiate new IMF programs at
a time when there's less help to be found.
Speaker 1 (00:40):
We are downgrading our forecasts for almost all countries as
a result of trade pensions.
Speaker 2 (00:48):
On this week's Next Africa Podcast, we look at what
the mood is like at the Spring meetings and what
African governments can hope to get from the IMF and
whether they can sell that back home. I'm Jennifer Zabasaja,
and this is the Next Africa Podcast, bringing you one
story each week from the continent driving the future of
(01:10):
global growth with the context only Bloomberg can provide. Joining
us to discuss this week is our reporter Matthew Hill.
He's based in Cape Down that has been following these
IMF proceedings very closely this week and also for the
past few years. Matthew, thank you so much for joining us.
Great to have you on the pod.
Speaker 1 (01:30):
Hi Jen, Yeah, thanks very much for having me. I'm
doing well. How about you? Good? Good?
Speaker 2 (01:35):
And you know, really fascinating times to be talking to
you and to be watching how finance ministers and central
bank governors are navigating a lot of the discussions right
now around the Spring meetings. Let's just start with the
backdrop of the Spring meetings. It's it's been based on
some of the studies that have been coming out over
(01:56):
the past few days, quite a gloomy outlook on the
glove glible economy. What exactly have we heard from the
IMF about where we're at right now and potentially where
they're expecting us to go?
Speaker 1 (02:11):
Just to set the scene a little bit, every year,
during the Spring Meetings in Washington, the IMF announces its
latest World Economic Outlook that has all kinds of forecasts
about growth, commodity prices, and other numbers that investors and
governments pay very close attention to. This month, just a
(02:32):
couple of weeks ahead of the meetings, President Trump dropped
his tariff bondshell at the White House Rose Garden, and
that's basically changed everything. You can imagine the IMF economists
just a couple of blocks away scrambling to revise all
their numbers and get the World Economic Outlook redone to
(02:55):
reflect the outsized impact. The result, in short is slower growth.
And for Sub Saharan Africa, the Fund cut its expansion
forecast for twenty twenty five by more than the global average,
to three point eight percent from the four point two
(03:16):
percent it saw as recently as January.
Speaker 2 (03:19):
So three point eight percent growth for twenty twenty five
for Sub Saharan Africa is that what you're saying?
Speaker 1 (03:25):
That's right? In January this year, the IMF gave an
update to its World Economic Outlook that saw growth at
four point two percent for twenty twenty five. So cutting
that now to three point eight percent in its outlook
that it released this week, that's a pretty sharp cut.
Speaker 2 (03:45):
What does that say, Matt about the Sub Saharan African
economy right now? What more should we expect the IMF
to expand on based on these numbers that you were
just outlining there.
Speaker 1 (03:59):
The main thing I guess are what the lower commodity
prices and slower global growth mean for African economies. For
oil exports like in Golan Nigeria, the impact is quite pronounced.
On the other hand, gold prices keep hitting new highs,
(04:21):
and for the continent's biggest producer of gold, Garner, it
will benefit from that. Oil importers like South Africa will
also benefit because of low inflation. And I'm also watching
out for what all of this means for debt sustainability
on the continent. That's been a big theme in recent
(04:43):
years after the pandemic, and we've already seen Zambia, Garner,
and Ethiopia defaulting on their debt and seeking debt restructuring.
With slower global growth and lower commodity prices, that means
that the risks are are only growing for other countries.
And we've already seen the continents governments were on average
(05:07):
spending twenty seven percent of their revenue, so that's more
than a quarter of their total revenues on interest payments
last year. So this really just makes the strings much higher.
Speaker 2 (05:21):
Well, let's talk more about that, Matt, because you have
been following some of these IMF programs very closely, in
particular Zambia. Of course, as far as Zambia and Ganna
Go and their IMF programs, maybe let's start with the
assessment of these two countries and how these programs have
gone with the IMF at this point.
Speaker 1 (05:43):
Yeah, that's an interesting question. I interviewed the Zambian Finance
minister just a few days ago and he spoke quite
glowingly about how Zambia's IMF program has worked out for them.
The government essentially had to get on an IMF program
when it defaulted on its debt back in twenty twenty
(06:03):
and announced that it needed to restructure it. It sought
to do that using the Group of Twenties Common Framework,
which is basically a set of guidelines for poor countries
to use to restructure their debt that requires an IMF
program to be in place. But with that IMF program,
the country's economy has done quite well. Even with the
(06:26):
worst drought in decades that it suffered last year, growth
was still at four percent, which was much higher than
what the initial expectations were, and the government still sees
the economy expanding by six point six percent this year,
which would be the best outcome for Zambia since twenty twelve.
(06:49):
Copper production, which is Zambia's main export, is booming and
the government's forecasting that it could reach a million tons
this year for the first time. And though the debt
restructuring process has taken years and it's still not one
hundred percent complete, the economy really does seem to have
(07:11):
turned a corner. We're also seeing inflation coming down. The
government expects that it's going to be within its target
band of four to eight percent for the first time
in years by the end of the year, and the
government's restored budget credibility. It's also at the same time
managed to boost spending in crucial areas like education two
(07:32):
even with the pretty strict targets that the IMFs set right.
Speaker 2 (07:38):
And we've talked about the Common Framework and some of
the criticisms around that in the past, Matt, can you
talk to us about then Ghana and how that story
is different.
Speaker 1 (07:48):
Gan has also done quite well. It's performed better under
its economic program, its IMF program, though we did see
some slippage last year as the government increase spending ahead
of very elections. The new administration has committed to bringing
the program back on course by returning to a primary
(08:11):
budget surplus this year after a deficit last year. And
for both Zambia and Ghana, they both made big strides
in restructuring their debt, thanks in part to support from
the IMF.
Speaker 2 (08:25):
And stick with us, Matthew. When we come back, we'll
talk about some of the countries that are having a
bit tougher over time with the IMF and the programs,
and what hope there might be for renegotiation. We'll be
right back and welcome back.
Speaker 1 (08:46):
Today.
Speaker 2 (08:46):
We're looking into the IMF Spring meetings that happened in
Washington over the past two days. Matthew Hill, our Bloomberg reporter,
is joining us. So, Matthew, we've talked about some of
the winners, so called winners from the IMF programs, but
it's not all good news for Sub Saharan African economies,
especially Kenya and Mozambique, both which have had to scrape
(09:08):
their IMF programs. How do these compare to some of
these other countries that you just outlined.
Speaker 1 (09:14):
For us, the difference has been pretty significant and violent
in the cases of Kenya and Mozambique. I mean, for Kenya,
the big problem has been to meet the targets of
its IMF program. After massive resistance from citizens against tax increases,
(09:36):
the government tried to push through last year and ultimately
the government had to withdraw the proposed legislation that would
significantly increase the tax burden on citizens. Last month, the
IMF announced that Kenya wouldn't complete its existing program and
(09:59):
the government had instead asked for a new one, and
our colleagues in Nairobi have done some great reporting around
that and the reasons why, and largely because it missed
revenue benchmarks that had agreed to with the IMF. We've
seen a similar situation with Mozambique. The IMF last Friday
(10:21):
announced that its program with the Southeast African nation would
also end prematurely and talks on a new one would
start soon. Mozambique is in a really tight spot economically
at the moment. We've seen unprecedented protests after its elections
(10:43):
in October. Those really hit the economy hard and government
revenues with it, and the government had already been struggling
to keep in line with its IMF program even before
the elections. There were big problems with the civil servants
(11:03):
wageable especially and now social tensions are still really fragile
after the election protests, and debt servicing is placing huge
strain on the government's finances. So it is a really,
really tough time for the government to be trying to
(11:27):
push through any aggressive reforms that could come with a
fresh iron left program.
Speaker 2 (11:34):
Yeah, and I mean many people probably remember some of
those pictures from Mozambika, Maputo and also in Nairobi. When
you think about what these governments are facing, are they
stuck between a rock and a hard place? Because on
the one hand, they do see some of these other
countries like Ghana and Zambia who have at least been
(11:55):
able to usher in some new policies and make some changes,
But then when these governments try to do so, they're
met with resistance. So have we heard anything from them
about negotiations, whether or not that's even on the table
during these spring meetings.
Speaker 1 (12:12):
Yeah, that's a very important point. Obviously. Now with the
global economic backdrop becoming like Gloomia, that also makes it
even more difficult. In both of these countries, the governments
are faced with incredibly difficult decisions. Both need the financing
from what's known as the lender of last resort, and
(12:37):
with the soarrowing borrowing costs in commercial debt markets, those
have made it unattractive to borrow for now, maybe even impossible.
And another element is that the IMF deals usually bring
with them more concessional financing from others like the Bank
(13:00):
and the African Development Bank too. But to agree to
the frameworks that the governments can sell to both their
own populations as well as the IMF back in Washington
is not an easy task. And I think some of
those tough discussions are taking place this week.
Speaker 2 (13:23):
And Matt, what if any impact does the US's pullback
in aid to Sub Saharan Africa have to do with
some of these negotiations. Could it play into these discussions.
Speaker 1 (13:35):
A very important point. It's easy to forget that before
the tariffs, we had this huge pullback in aid from
the US, which really just adds to pressures and complexities
of these talks and adds to the headache that governments
like Mozambique face when drawing up their budgets. There's millions
(13:57):
of dollars tens or hundreds of millions of dollars that
used to be that simply aren't anymore, and of course
it's not just the US. We've seen the UK also
announcing that it plans on cutting its aid budget in
favor of defense spending, and there's other European countries that
are following suit too. So rarely for low income African
(14:19):
countries that were relying on all of this aid, they
have to either cut spending or try find the money elsewhere.
Speaker 2 (14:28):
Matt, Before I let you go, I wanted to ask
this question that I think has been up for debate
for quite a while when it comes to the IMF
and some of these programs, and you mentioned it earlier,
the Common Framework. Do you expect this to continue to
be the framework that is used to support some of
these Sub Saharan African economies. Are we seeing enough good
(14:50):
examples of how this could potentially work or could we
potentially get some new discussions in place for other options,
especially when you look at the global backdrop right now?
Speaker 1 (15:03):
Yeah, I guess that's quite a difficult question that some
governments are going to be grappling with in the coming months.
For now, the G twenty Common Framework for Restructuring debt
is basically all that low income countries have to work with.
We've seen that in gn A, Zambia now Ethiopia, which
(15:26):
is also defaulted and is restructuring its debt using the
Common Framework. The process has taken years, it has improved
as things have gone along, and there have been efforts
under the IMF. They've got what is known as the
Global Sovereign Debt Round Table, which seems to make sure
(15:47):
that processes are expedited and work more efficiently. But for now,
the Common Framework is what we have. I mean, there's
also an expectation that a lot well, that more countries
might be going to the International Monetary Fund for financial
assistance this year amid all this uncertainty on lower revenues,
(16:10):
and of course for countries already in discussions with the IMF,
the economic shock that we're seeing right now could inject
a new sense of urgency into those talks.
Speaker 2 (16:20):
And you can read all of our coverage on the
IMF Spring meetings across Bloomberg platforms. Now here's some of
the other stories we've been following across the region this week.
Traders raise their bets that South Africa's Central Bank will
resume its rate cutting cycle next month after inflation slowed
to its lowest level in almost five years in March,
(16:42):
taking it below the floor of the central Bank's target range.
The annual inflation rate fell to two point seven percent
last month. That was less than the three percent median
estimate of fifteen economists in a Bloomberg survey. And South
Sudan will send on to Washington in the coming days
to discuss the return of one hundred and thirty seven
(17:04):
nationals the US intends to deport. Earlier this month, the
US suspended visas for all South Sudanese nationals after the
East African nation refused to receive a deportee who it
insisted wasn't a citizen. South Sudan later reversed its decision.
And you can follow these stories across Bloomberg, including the
(17:26):
Next African Newsletter. We'll put a link to that in
the show notes. This program was produced by Adrian Bradley.
Don't forget to follow and review this show wherever you
usually get your podcasts. I'm Jennifer's Abasaja. Thanks as always
for listening.