African Central Banks Monetary Policy Rates and Foreign Reserves

LAGOS (Capital Markets in Africa) – Algeria’s foreign exchange reserves dropped by $7.1 billion to $121.9 billion in the third quarter of 2016 due to lower oil prices that have hit the country’s finances, Central Bank Governor Mohamed Loukal said. Oil and gas earnings, which make up 94 percent of total exports and 60 percent of the state budget, fell to $18.8 billion in the first nine months of 2016, down 26.3 percent from the same period a year earlier. Reserves stood at $129 billion in June and $144.1 billion at the end of 2015, Loukal was quoted by the state news agency APS as saying.

Angola’s central bank kept its benchmark lending rate unchanged at 16 percent, partly due to slowing inflation resulting from an increase in the supply of goods and services as well as restrained demand, it said. Angola’s net foreign exchange reserves fell to $22.989 billion in September from a revised $23.221 billion the previous month, data posted on the central bank’s website showed.

Botswana’s central bank left its benchmark lending rate at 5.5 percent, the regulator said. The current state of the economy and both the domestic and external economic outlook, suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank’s medium-term objective range of 3 – 6 percent,” the bank said in the statement.

Egypt’s net foreign reserves rose to $19.591 billion at the end of September, up from $16.564 billion at the end of the previous month, the central bank said. Egypt had roughly $36 billion in reserves before its 2011 uprising ushered in a period of political turmoil, scaring off tourists and foreign investors, key sources of hard currency. The International Monetary Fund last month agreed in principle to grant Egypt a $12 billion three-year facility to support a government reform programme aimed at reducing a budget deficit. Board-level approval depends on the government’s securing $5 billion to $6 billion in bilateral financing for the first year.

Kenya will raise its borrowing from the domestic market for the fiscal year from July to 294.6 billion shillings ($2.91 billion) from its initial target of 236.1 billion shillings, the Treasury said on its website. The new amount will be equivalent to 4.1 percent of the gross domestic product, from 3.3 percent in the initial forecasts, the Treasury said in a budget review document posted on its website. The overall fiscal deficit, which was projected at 9.7 percent of GDP, would fall to 8.1 percent, while net foreign financing would be halved to 287.6 billion shillings.

Mozambique’s central bank has lifted its benchmark lending rate by 600 basis points to 23.25 percent, its monetary policy committee said. The Bank of Mozambique said in a statement the decision was taken to stabilise the exchange rate and tame high inflation, which quickened to 21.96 percent in August.

Namibia’s central bank left its benchmark lending rate unchanged at 7 percent for a fourth consecutive time on Wednesday, continuing attempts to support the weakening economy. The southern African nation’s economy shrank by 1.2 percent in the second quarter of 2016 compared with a 3.4 percent expansion in the first three months of the year as construction, hospitality and mining sectors declined.

Uganda’s central bank cut its benchmark lending rate to 13 percent from 14 percent, saying there was room to support growth by easing. Policymakers in the East African nation embarked on an easing cycle in April, and they have since brought down the rate from a peak of 17 percent, that was caused by a surge in prices. Core inflation dipped to 4.8 percent last month from 5 percent in August, while the economy expanded by 4.8 percent in the financial year ended June, up from an earlier estimate of 4.6 percent, bank governor Emmanuel Tumusiime-Mutebile said.

South Africa’s central bank may be nearing the end of its interest rate hiking cycle but the bar remains very high for reductions, Governor Lesetja Kganyago said. The bank kept its benchmark lending rate unchanged at 7 percent for a third consecutive time in September, and has since repeatedly said it might soon halt an incremental rise in interest rates that started in early 2014 to tame inflation. The hiking cycle may be nearing its end. However, this does not mean the interest rate reductions are imminent, as we would like to see inflation more firmly within the target range on a sustainable basis over the forecast horizon, he said.

Nigeria’s foreign currency reserves fell 20.5 percent year-on-year to $23.95 billion by 27th October 2015, down 2.7 percent month-on-month, central bank data showed. The central bank has been selling dollars to support the weakening naira, hit by low oil prices that have triggered the first recession for 25 years. The central bank will sell $500 million currency forwards at an auction to clear demand backlog from manufacturers, traders said, as the regulator tries to find ways to resolve a chronic dollar shortage plaguing the West African nation.

South Africa’s net foreign reserves rose to $41.953 billion in September from $40.795 billion the previous month, the Reserve Bank said. Gross reserves were also up at $47.247 billion from $45.708 billion, the bank’s data showed. The forward position, which represents the central bank’s unsettled or swap transactions, climbed to $2.201 billion from $1.771 billion.

South Africa’s September credit growth quickens to 7.19 percent year-on-year. Growth in credit demand by South Africa’s private sector accelerated to 7.19 percent year-on-year in September from 6.15 percent in August, central bank data showed. Expansion in the broadly defined M3 measure of money supply was also faster at 5.64 percent year-on-year compared to 5.48 percent.

South Africa’s Treasury widened its budget deficit forecast for the 2016/17 fiscal year to 3.4 percent of GDP from 3.2 percent previously, saying declining economic growth had reduced tax revenue estimates. In its medium term budget statement, Treasury said efforts to reduce borrowing had been frustrated by consistent downward adjustments to growth forecasts and tax revenue as household consumption and private sector investment fell. The government will aim for a “measured” approach to consolidating its budget by avoiding sharp cuts to spending while continuing to prioritise capital investment.

South Africa plans to borrow $6 billion from international markets over the next three years, with foreign currency bond issuance increasing by $2.1 billion in the current financial year, the Treasury said. Treasury has already issued a pair of dollar bonds in overseas capital markets worth $3 billion in September and $1.5 billion in April. It said the key driver of increased debt were the weaker fiscal position and the weaker rand. Foreign loan debt would rise to 10.6 percent of gross domestic product in 2016/17 from 9.9 percent in 2015/16.