Business
Western debt crises may tempt Africa to backslide
Copper prices fell to their lowest point in over a month on Friday, a dampener for producers such as the Democratic Republic of Congo, whose miners are aiming to ramp up output of the metal by 25 percent to one million tonnes this year.
Still No Free Money
The last thing African governments need right now is a hit to revenues from their most valuable resources, particularly as many have yet to straighten out their public finances.
Ivory Coast, whose recovery from this year’s brush with civil war relies partly on steady revenues from cocoa and oil, has announced that it does not have the means to pay back any defaulted debt until at least next year.
Neighbouring Ghana, whose government spent the first half of its term dealing with the debt legacy left by the previous administration, revised its 2011 deficit target last month up to 5.1 percent of GDP from 4.1 percent, a level the market can live with unless it slips further before a 2012 election.
Nigeria’s revised 2011 budget keeps it just within a three percent deficit target only after President Goodluck Jonathan negotiated down higher spending sought by parliament.
The International Monetary Fund (IMF) labels Ivory Coast’s debt default a “consolidation measure” justified by the imperative of getting its shattered economy straight. The current Fund mood was understanding of such difficulties.
Congo itself goes further, arguing the West’s debt crises vindicate its move to defy initial IMF concerns and sign a 2010 deal for $6 billion of funding from China, suggesting the pact opens up a new realm of credit vistas.
