Moody’s Sees More African Countries Seeking IMF, World Bank Help

LAGOS, Nigeria, Capital Markets in Africa: More countries in sub-Saharan Africa are likely to turn to international lenders for emergency financing, according to Moody’s Investors Service.

Ghana, Angola and Mozambique have turned to the International Monetary Fund for help in the past year and Zambia may soon follow suit. Kenya took on a $1.5 billion standby facility and Nigeria, Africa’s biggest economy, is negotiating a loan from the World Bank. Zimbabwe is also engaging with the Washington-based lenders to obtain fresh credit, while the Democratic Republic of Congo plans on asking the World Bank for support.

“We are likely to see more sub-Saharan African sovereigns taking this course of action,” Moody’s said in a report released on Monday in the Zambian capital, Lusaka. “However, this option is limited in size and only provides a backstop if debt ratios and funding requirements stabilize over the program horizon.”

High yields are shutting nations on the continent out of international capital markets at a time when fiscal and current-account deficits are widening. After commodity prices fell to 17-year lows in January, sub-Saharan Africa’s economic growth will probably decelerate to 3 percent in 2016, the slowest pace in more than ten years, the IMF said last month. Four years ago, the region’s economy expanded by more than 5 percent annually.

“The cost of accessing international capital markets has risen sharply, and investor concerns about government liquidity and the debt sustainability of some Eurobond issuers have emerged,” Moody’s said. “With the exception of Kenya, Nigeria and South Africa, domestic local-currency markets are not well developed as a long-term funding source, especially in those countries that relied on fiscal savings during the commodities boom.”

Most African countries now have twin deficits, with shortfalls on both their current accounts and budgets, the African Development Bank said in a reportMonday. This could threaten macroeconomic stability if it results in declining foreign exchange reserves, the lender said.

“The downturn in global commodities is unparalleled in its depth and breadth,” Moody’s analysts including Rita Babihuga said in the report. “We project every country in the region to post a fiscal deficit in 2016.”