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Note: This document is from the archive of the Africa Policy E-Journal, published
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Africa: Africa Recovery
Africa: Africa Recovery
Date distributed (ymd): 971226
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
This posting contains the table of contents and an article on resource
flows to Africa
from the latest issue of Africa Recovery.
This issue is available online at
http://www.un.org/ecosocdev/geninfo/afrec
For additional information on the current situation of African economies
and African economic policy initiatives,
see the web site of the Economic Commission for Africa: http://www.un.org/depts/eca
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Africa Recovery
Africa Recovery is published in English and French by the Library and
Publications Division of the United Nations Department of Public Information,
with support from UNDP and UNICEF. Its contents do not necessarily reflect
the views of the United Nations or the publication's supporting organizations.
Material from this newsletter may be freely reproduced, with attribution,
and a clipping would be appreciated.
Correspondence should be addressed to:
The Editor, Africa Recovery, Room S-931,
United Nations, New York 10017 USA
Tel: (212) 963-6857; Fax: (212) 963-4556;
Fax/Modem: (212) 963-1193; e-mail: [email protected]
Vol. 11 No. 2 -- October 1997
In this issue:
- Security Council focuses spotlight on African conflicts
- Sharp fall in resource flows to Africa
- "Africa must make the most of its assets": Thelma Awori
- Yoweri Museveni: rebel with a cause
Special Report: Agriculture in Africa
- Africa strives to revitalize agriculture
- LDCs must give higher priority to agriculture
- ECA focuses on the food security/population/environment nexus
- Women farmers, the 'invisible' producers
- Interview with Jacques Diouf, FAO Director-General
- Promising start to FAO's food security drive
- Southern Africa shifts food strategies
- SADC: more cereal trade, smaller reserves
- 'Africanizing' agricultural research
- Farmers organize to promote interests
- Burkina Faso protects its fragile soils
- The UN Special Initiative on Africa
- Improving Africa's water supply
- Strengthening water basin management in the Zambezi
Departments
Sharp fall in resource flows to Africa
Concessional loans from IMF and World Bank also plunge
By Christina Katsouris -- Washington, DC
Africa Recovery
(October 1997)
Net capital flows to African countries, including concessional aid,
fell sharply last year although the continent recorded its strongest economic
growth rate this decade. And with many African countries over-burdened
by debt, progress has been slow in implementing the complicated relief
package known as the Heavily Indebted Poor Countries (HIPC) initiative.
Uganda got the first debt deal in April, to take effect next year, while
Burkina Faso, Cote d'Ivoire and Mozambique could get deals before the end
of this year. Most of the 19 countries now considered as candidates for
HIPC deals are African.
Despite the known dependence of many African countries on development
aid, net official flows to Africa plunged by 48 per cent in 1996 to $3.2
bn, the lowest level for a decade, the International Monetary Fund (IMF)
reports in its latest World Economic Outlook. These flows are made up of
all lending from official bilateral and multilateral sources, minus repayments.
There was also a 43 per cent fall in the IMF's soft loan approvals to Africa
through its enhanced structural adjustment facility (ESAF). Similarly,
sub-Saharan Africa saw a 38 per cent drop in its primary source of World
Bank lending -- soft loans from the International Development Association
(IDA).
While the total decline in net capital flows to Africa was a somewhat
less dramatic 17 per cent (to $13.9 bn) in 1996, this was still the second
annual decline in a row. Net private flows, which rose by $0.1 bn to $10.7
bn failed to counter the decline. The good news was that within the private
flows, net direct investment rose by over 78 per cent to $5 bn, the highest
for at least a decade, and more than offset a 68 per cent plunge in volatile
portfolio investment from $1.9 bn to $0.6 bn. As the IMF publication does
not provide a breakdown of the distribution of these flows, it is unclear
whether there has been any change since the 1985-95 period when Africa's
nine oil-exporting countries took 73 per cent of foreign direct investment
(FDI).
Plunge in multilateral lending
IMF loan approvals to sub-Saharan Africa fell substantially, with ESAF
loans -- the main vehicle for IMF lending to the region -- down by 43 per
cent to $672 mn from $1.19 bn in 1995/96. Total ESAF approvals in turn
fell from $1.47 bn to $911 mn.
New loan commitments by the World Bank to sub-Saharan Africa for the
fiscal year to June 1997 in turn dropped 36 per cent to $1.73 bn -- their
lowest levels this decade, and well below the average annual $3.2 bn of
the 1987-91 period -- while disbursements fell by 17 per cent to $2.47
bn. The 38 per cent fall in IDA soft loans -- the largest source of Bank
lending to Africa -- from $2.74 bn to $1.68 bn, reflected the drop in IDA's
total lending to developing countries, which fell 33 per cent to $4.6 bn.
The causes include a reorganization of Bank staffing, and temporary funding
arrangements under IDA's 11th replenishment covering 1996-1999 lending
operations, pending the clearance of US arrears to the 10th IDA replenishment.
The Bank also attributes the drop in loan approvals to Africa to greater
selectivity in lending, and the greater priority being given to countries
showing "firm commitment" to better economic management, strongly
focused on poverty issues and able to use resources efficiently. The fall
is also due to cancellation of failed projects, and more rigorous preparation
for new loans.
Bucking the downtrend, lending to Africa through the Bank's private
sector affiliate, the International Finance Corporation (IFC), rose from
$191 mn through 71 investments in fiscal 1996 to $385 mn in 1997 through
73 investments. The IFC lent some $285 mn on its own account and syndicated
another $100 mn.
The queue for HIPC deals
Burkina Faso should be next in line for an HIPC debt reduction deal
before the end of 1997, followed by Cote d'Ivoire and Mozambique. The World
Bank and IMF have already approved relief for Burkina Faso in principle,
and are now ironing out small differences over just how close its target
debt-to-exports ratio should be to the lower end of the 200-250 per cent
range. Some say 205 per cent would best help the country achieve a sustainable
level of debt -- defined as a level at which it could service reduced debt
while continuing to invest in development.
Technical work and verification of Cote d'Ivoire's debt is now in the
final stages. The only remaining hurdle now to a HIPC deal is IMF approval
of an ESAF, and agreement could be reached by November. Officials indicate
that Cote d'Ivoire could achieve debt sustainability with a target debt-to-export
ratio of 145 per cent. This reflects new criteria approved in April to
cater for such countries as Cote d'Ivoire with "open trading economies"
facing severe budgetary problems due to heavy debt obligations.
Creditors are also aiming for a December decision on Mozambique, a country
with an especially complex debt structure and creditor profile. Its nominal
debt at end-1996 was $7.5 bn (or a staggering 1,358 per cent of export
revenue), or $5.6 bn in net present value (NPV; defined as the sum of all
future debt-service obligations on current debt, discounted at market interest
rates). And unlike most other HIPCs, Mozambique's bilateral debt is a relatively
high 73 per cent of total debt, while multilateral debt is unusually low
at 14 per cent.
Presentation of Mozambique's preliminary document to the IMF and World
Bank Boards was delayed until April 1997 by problems with its bilateral
debt to Russia -- some $2.3 bn in nominal terms, incurred during the Soviet
era at an artificially high exchange rate. Russia's formal entry into the
Paris Club in September means there is now an agreement in principle on
applying Paris Club terms to Mozambican debt. What remains to be done is
reconciliation of the actual figures for all creditors, including Russia,
and an IMF team was in Mozambique in late October helping prepare the data
for this exercise. With Russia now on board, at least in principle, an
IMF source in Washington anticipates no further major problems for arriving
at an HIPC deal for Mozambique.
The preliminary document for Mozambique recommends an HIPC deal taking
effect by the end of this year and ending in June 2000. Due to Mozambique's
acute vulnerability to external shocks, it also recommends a target NPV
debt-to-exports ratio at the lower end of the 200-220 per cent range and
a debt service-to-exports ratio below 20 per cent.
Relief at the lower end of the debt-to-exports target range would require
donors to provide $1.48 bn, assuming an end point in 1999. This includes
$946 mn from bilateral creditors and $533 mn from multilateral creditors.
But, the figure for bilateral creditors -- calculated on the basis of
amounts owed to each creditor -- could exceed the Paris Club's ceiling
of 80 per cent cancellation of eligible debt stock. Multilateral creditors
favour proportional burden-sharing, but the Paris Club wants the multilaterals
to pick up the tab for amounts over 80 per cent. Mozambique awaits the
outcome of this dispute.
This material is being reposted for wider distribution by the Africa
Policy Information Center (APIC), the educational affiliate of the Washington
Office on Africa. APIC's primary objective is to widen the policy debate
in the United States around African issues and the U.S. role in Africa,
by concentrating on providing accessible policy-relevant information and
analysis usable by a wide range of groups and individuals.
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