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