Thursday, January 14, 2016

In God We Trust...

Zambian president’s made a call for prayer rallies for the country’s embattled currency. President Edgar Lungu wants his people to pray for the kwacha on a national day of devotion and fasting on Sunday to reverse a decline in the world’s worst currency and fix a litany of problems from plunging copper prices to electricity shortages. He is seeking divine intervention to help an economy in crisis as the kwacha’s slumps against the dollar.  Trevor Simumba, managing director at Sub-Saharan Consulting Group Zambia, a business advisory firm, said “We know God can do miracles, but He cannot change things that are facts on the ground.”

China's imports from Africa fell nearly 40 percent last year, officials said Wednesday, as low commodity prices and slowing growth in the Asian giant hit trade.  Natural resources from Africa such as iron ore and oil have helped fuel China's economic boom, and it became the continent's largest trade partner in 2009, giving it growing diplomatic influence. But growth in the world's second-largest economy has slowed to its lowest since the aftermath of the global financial crisis, punishing world prices for commodities -- the bedrock of African exports. Oil exporters are expected to be hit especially hard. China said its imports from Nigeria slumped more than 50 percent by value last year. Beijing said in November its direct investment in Africa dropped "more than 40 percent". The World Bank warned that a synchronised slowdown in the biggest emerging markets, the so-called Brics, could be intensified by a fresh bout of economic turmoil. According to the International Monetary Fund, Africa’s real gross domestic product fell from 5% in 2014 to 3.7% in 2015.

Meanwhile, Africa's demand for Chinese goods is rising. In 2015 China sent $102bn worth of goods to the continent, an increase of 3.6%.

Ibrahim Mayaki, the head of the New Partnership for Africa’s Development, said the sustainability of African debt is in question as repayment services – already a major portion of state budgets – look set to increase significantly.  “This will lead states to make tough choices, from the amputation of certain infrastructure investments to the postponement of social services,” Mayaki said

Aly Khan Satchu, an independent trader in Nairobi explained “Those countries that were just making it now have tipped over the edge because they are going to find it very expensive to borrow international money. They are being squeezed, they don’t have enough of a productive economy and also taxes will slow down very, very dramatically.” For Satchu, the hardest-hit African countries will be forced to call on the IMF for help in raising money on international markets, as oil-producer Ghana has already been forced to do.

Africa’s top oil producer, Nigeria, is facing pressure to devalue the naira, which has come under extreme pressure despite unorthodox monetary policies aimed at restricting the supply of dollars. Satchu says a devaluation is inevitable, and that the tough market conditions may force necessary policy changes. “It’s an irony that Nigeria is sending any of its oil out to be refined only to import it back,” he said. “It’s definitely been a wake-up call. You find policymakers tend to make changes when their feet are held to the fire; this is the equivalent of having their feet held to the fire.”

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