Commodity slump pushes Africa to IMF

Ghana is a major exporter of gold.

Ghana is a major exporter of gold.

Falling commodity prices have pushed several African countries back into the embrace of the International Monetary Fund, which has an opportunity to push for reforms and inject transparency into opaque economies.

Top of the list is Angola, Africa’s second biggest crude producer and third largest economy, which has not borrowed from the IMF since 2009 and just a few years ago had the Fund all but turning a blind eye to missing billions.

It is hardly alone, with depressed prices for commodities ranging from oil to copper sapping the budgets of African governments and sending them to the IMF, the “lender of last resort” which typically imposes tough conditions for assistance.

Gas-rich Mozambique and gold and oil producer Ghana, hard hit by the sour commodity cycle, both inked financial arrangements with the IMF in 2015, their first in six years, according to the Fund’s website.

Ghana’s was a three-year, $918 million assistance deal signed as its fiscal and current account deficits ballooned.

Africa’s second-largest copper producer, Zambia, started talks in March on an aid programme. Lusaka last signed a financial arrangement with the IMF in 2008.

And the region’s most industrialised economy, South Africa, which is also a major producer of platinum, gold and coal, may be forced to turn to the IMF if its credit rating gets downgraded to junk.

China this week offered Nigeria a loan of $6 billion to fund infrastructure projects but Africa’s top oil producer is still expected to also seek assistance from the IMF for the first time in almost two decades.

African economies that have already taken the IMF route are already showing positive results. Ghana for example, with an IMF deal behind it, is looking to soon launch a Eurobond.

“What we do know is that countries like Ghana, that would have faced extremely challenging conditions in the absence of an IMF programme, have generally been better reformers,”  Razia Khan, Africa chief economist for Standard Chartered Bank told Reuters.

“It is largely on the basis of Ghana’s experience that markets have started to rally when other sovereigns even mention that they are seeking to negotiate a programme with the IMF. This suggests that for now investors are optimistic that it will bring about actual reforms,” she said.

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