REGIONAL NEWS
Rich nations pledge $20bn in three year period.
The rich nations under their umbrella, G8, have pledged financial support amounting to USD 20billion over a period of three years, in farm aid to poor nations, Reuters reported. According to the US, a move to farm aid is much more important instead of food aid, but over 1.02bn people need food help this year, the UN said and food aid is necessary until they can produce their own.
The leaders of the African countries of Ethiopia, Algeria, Angola, Egypt, Libya, Nigeria, Senegal and South Africa discussed food security and farming with their G8 counterparts and pushed for climate-change compensation. On the other hand, the European Union and Japan urged a code of conduct for responsible investment in the developing nations where farmland acquisition is on increase.
East African governors disagree on dollar reserves.
East African central bank governors have failed to agree over how much dollar reserves is to be held by each country ahead of the introduction of a single regional currency in the year 2012. This disagreement stemmed from different interpretations of the necessities that each country is supposed to hold enough dollars to cover six months of imports. The countries that form the East African Community, that is, Kenya, Uganda, Tanzania, Rwanda and Burundi are planning to have a common legal tender by the year 2012 and this is expected to reduce the cost of currency conversions across the regions and will also eliminate the risk of volatile interest rates for cross-border investments within the region.
‘SADC not effective at coordinating power projects’
The South Africa’s energy minister Dipuo Peters has commented that Southern African Development Community (SADC) is not effectively coordinating power projects in the region. According to the minister, unprecedented growth in region has put a strain on electricity power supply and joint efforts between SADC member states is seen as the best way to balance supply of and demand for the electricity. SADC has several viable projects waiting to be developed, and the more cost effective tariffs should see renewed private investment in energy projects within the region.
Africa’s hard knock from global crisis
The finance minister of South Africa revealed that African countries have taken a severe knock from the global economic crisis and some of the financial obligations to help the continent have not been realized. Minister Gordhan told a conference to discuss the World Development Report 2009 that only about 10 to 15 countries in Africa had the capacity to be able to implement counter-cyclical responses to help them overcome the financial / economic crisis. He said economic growth in some African countries has “gone into the deep negative figures” and that their fiscal deficits ranged from 10-15%, making the situation constraining to most countries’ ability to respond significantly to the global economic crisis.
RWANDA
Remittances to Rwanda rise despite the global hiccup
Remittances sent home by Rwandans working abroad have increased by 26% y/y for the first five months of 2009 up to USD 71.4M from USD 56.8M previously despite the global economic downturn. According to the central bank of Rwanda, remittances for 2009 are now forecast at between USD 160M and USD 200M making it the country’s second largest foreign exchange earner after tourism which is said to have brought in USD 218M in 2008. The African Development Bank said that remittances and the aid inflows to Rwanda had increased bucking the expected trend as a result of reforms as well as improved economic conditions in the country.
Meanwhile Fitch has affirmed Rwanda’s long-term foreign and local currency rating IDR at B- with a more positive outlook and also confirmed a short-term foreign currency IDR of B and a country ceiling of B-. The ratings agency said it continued to be impressed with Rwanda’s obligation and dedication to reform and also the continued country’s growth performance, but notes that although per the country’s capita income has doubled over the last four years, it still remains below the B median. Fitch also forecasts that the economic growth in Rwanda will continue in the 6% to 7% range on the back of government efforts to enhance the business environment and address the infrastructure deficit in the country.
KENYA
Kenya tax body feels the pinch of the global economic downturn.
The Kenya Revenue Authority (KRA) fell short of its revenue target by KES 12bn on the back of the global economic downturn, only gathering KES 481bn out of KES 493bn the body had budgeted. The KRA’s target for the current 2009/10 financial year is KES 545bn but meeting the new targets will be quite difficult as severe drought is badly affecting agricultural production and high inflation is upsetting the profitability of businesses and the affordability of goods for the Kenyan wananchi, thereby affecting the country’s tax revenues. This elevates the question of how Kenya hopes to finance its planned budget expenditure.
Meanwhile, Kenya central bank is expected to retain its key rate at 8%, according to most market players, although more cuts are anticipated later this year. As the country struggles on the back of weaker exports, the Central Bank of Kenya has adopted a monetary easing stance to boost growth. At its last meeting in May, the
MPC cut the rate by 25bps, ending speculation of most analysts who had expected a decision to hold it at 8.25%. According to Reuters, the government expects the growth of 3% this year after expansion of 1.7% last year.
ANGOLA
Angolan central bank to contain drop in forex reserves
The Angolan central bank has announced its plans to implement measures to contain the drop in foreign exchange reserves in Angola, as a result of the lower oil-tax revenues following the drop in crude oil prices. The Central bank governor Abraao Gourgel said that the average monthly income from oil taxes fell from USD 1.33bn in Q1 of 2008 to USD 283mn for the first five months of 2009. Reuters reported that Angola’s foreign exchange reserves are down 30% this year to USD 12.2bn.
Meanwhile, Angola’s inflation rose to 13.95% in June, up from 13.83% in May on the back of rising food prices and that of non-alcoholic beverages; this is according to the national statistics institute. Month-on-month inflation for June stood at a figure of 1.11% up from 0.95% in May. The current 2009 government budget allows for an inflation rate of 12.5% which has been upwardly adjusted from 10% previously.
BOTSWANA
Botswana’s GDP drop by 20.3%
Botswana’s GDP has contracted by 20.3% in Q1 of 2009 on the back of reduced diamond mining output. As a result of the global economic slowdown, the global demand for diamonds has suffered a decrease and the economy is anticipated to face a deep contraction over the next two years.
According to the central statistics office, mining and quarrying contributed 68.6% to the decline in the country’s GDP. Water and electricity did also record a fall of 4% y/y in Q1as a result of a fall in consumption from the mining industry.
Meanwhile, the country’s inflation has slowed to three-year low of 7% in June. According to the Central Statistics Office, Botswana’s consumer price inflation rate slowed to a near three-year low of 7.0% y/y in June from 8.4% in May. Lowing inflation could lead to open the way for more interest rate cuts to boost such a weak economy. However, as inflation remains above the 3-6% target band, reports emerged that the Central bank governor Linah Mohohlo said last month that Botswana had room for further rate cuts, and later in June he announced a 150bps cut in the bank rate to 11.5%, bringing total cuts since December to
400bps, the agency said.
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