Luis Alonso Robas’ Post

Africa's financial economy has long been a topic of discussion and analysis. While some argue that the continent's financial sector is thriving and poised for growth, others contend that it is plagued by numerous challenges.

In November 2023, S&P Global Ratings analyst Zahabia Gupta and her colleagues - Omega Collocott, Samira Mensah and Tatiana Grineva - hosted a webinar focusing on South Africa's sovereign credit metrics. (Side note, I really like that this is an all-women team. Their analyses and research notes are top tier too.) Gupta noted at the time the National Treasury indicating that the fiscus would tap the central bank to meet fiscal requirements, was not a concern for S&P. In other words, S&P does not look at this as a credit negative. Of concern, however, was South Africa's lacklustre growth rate and the economy's low labour absorption. Since S&P began reviewing the sovereign in 1994, South Africa has always been volatile, according to Gupta. Gupta and her colleagues put into perspective what the key considerations are in the sovereign credit ratings, as well as the SOEs and sectors on S&P's radar. One of the main issues with South Africa is that the country tables reform or growth-enhancing plans without follow through. Here are three articles I have written looking at this from different angles: 1) ‘Economic and governance reforms do not progress as planned’ in South Africa, warns S&P: https://lnkd.in/eQJNsW2p 2) S&P Global Ratings expresses grim view on Transnet’s financial position: https://lnkd.in/drmKPxTS 3) 10 things on Ramaphosa’s economic team to-do list for 2023: https://lnkd.in/dfFXP_iR #southafrica #S&PGlobalRatings #budget2024 #economicgrowth #policyreform

“Ratings Affirmed; Negative Outlook: The Negative Outlook reflects a continued high level of political uncertainties, and deterioration in governance, which have weakened private investment and economic growth prospects. Peru's 'BBB' ratings are supported by moderate public debt, strong external liquidity, a track record of macroeconomic stability and a disciplined policy framework. The macro-policy framework has remained relatively resilient to political instability and an economic slump, in Fitch's view, but continues to be tested. Rating constraints include weaker governance, income per capita, and social indicators than the 'BBB' medians; high commodity export dependence; and low government revenue base.”

The IMF is intensifying efforts to financially support climate-vulnerable developing economies, Bloomberg reports. Managing Director Kristalina Georgieva disclosed that the IMF’s Resilience and Sustainability Trust, initiated in 2022, has already provided financial assistance to 11 countries, including six in Africa. The IMF plans to accelerate payments from the trust to meet the growing demand, acknowledging the financial strain faced by African nations due to various factors, including the Covid-19 pandemic, Russia’s invasion of Ukraine, and higher global interest rates. A significant portion of funding for the Resilience and Sustainability Trust has been redirected from the $650 billion worth of Special Drawing Rights (SDRs) issued by the IMF during the pandemic. This approach allows the IMF to provide concessional finance to climate-vulnerable middle-income countries that may not typically qualify for low-interest loans. Additionally, the IMF is exploring debt-for-nature swaps as a means of reducing debt burdens for countries in exchange for fulfilling national climate commitments. #IMF #emergingmarkets #frontiermarkets #internationaldevelopment

“The International Monetary Fund and many countries recognise that this division of the new resource is both inequitable and inefficient. They are talking of creating a mechanism for reallocating some of the funds – an amount of $100 billion is mentioned – to developing countries.” #IMFSpecialDrawingRights #GlobalEconomy #EconomicReform #AfricanEconomicDevelopment #FinancialInclusion #COVID19Response #DebtRelief #IMFPolicies #AfricanVoice #GlobalGovernance #ResilienceAndSustainabilityTrust #PovertyReduction #EconomicRecovery #AfricanLeadership #IMFReforms #SpecialDrawingRightsAllocation Link to full story: https://lnkd.in/dkXJif7t

Positive Market Sentiment Amidst Government of National Unity (GNU) Formation with 5 members in place ! Today, the JSE indices showed a remarkable performance, reflecting growing investor confidence following the implementation of South Africa's GNU last Friday. The JSE All Share Index closed at 79,748.83, marking a significant increase of 3.50%. Tomorrow could be profit taking , but who knows what is possible. As JP Morgan stated today , they propose overweight for South Africa in the short term, with huge potential for investors ! The South African Rand (ZAR) also showed strength against the US Dollar, with the exchange rate at 18.0438 ZAR/USD, appreciating by 1.25%. Are we on our way to 17.00 ZAR/USD? The strong upward movement in the indices highlights a positive market sentiment, bolstered by the hope that the GNU will bring much-needed political stability and policy coherence. Here is my further views on some Key Economic Indicators to keep an eye on and general issues! With a unified government, there's potential for improved fiscal discipline and governance, which may eventually lead to a reassessment of South Africa’s sovereign credit ratings or what many have come to know as Junk Status! Stability in governance could lead to more effective economic policies, potentially controlling inflation rates easier to 4.5 %. However, this remains contingent on policy implementation and global economic conditions. I believe an interest rate reduction may now be possible in 4th quarter and not 1st Quarter in 2025 only. The initial strengthening of the ZAR against the USD is a positive sign. Continued political stability and sound economic policies will be crucial in sustaining this trend. The possibilities on strengthening is excellent. Fuel prices will be positively impacted. Effective governance and a concerted effort to address financial irregularities could help South Africa move off the Financial Action Task Force's Greylist, improving its attractiveness to foreign investors. The journey ahead is challenging, but today’s market performance is a testament to the resilience and potential of our economy under the GNU. I will continue to monitor these developments closely as we work through this new chapter for South Africa 🇿🇦 Feel free to follow me for regular updates from a financial plannner perspective. https://lnkd.in/dT2QiGhZ

Multiple IMF member countries face large development needs which have been complicated by recent shocks. To help them mobilize the resources required to make progress along their development needs, the International Monetary Fund, together with The World Bank and development partners are advancing the Domestic Resource Mobilization Initiative called by the G20 in 2023. For the IMF, boosting capacity development in this area is at the center of this initiative. The recently launched Global Public Finance Partnership (GPFP) will assist in fostering good policies and strong management of member countries’ public resources by combining the IMF’s leading expertise on public revenue and spending. The IMF has also recently reviewed its Capacity Development Strategy to ensure the Fund’s support is tailored to country needs and well-integrated with its policy advice and financial support. Taken together, these efforts will help countries unlock domestic resources to meet their development needs.  Find our by attending or watching our event on Unlocking Domestic Resources for Development Through Global Partnerships on April 16 at the 2024 Spring Meetings https://lnkd.in/g29s4QY2

Iam looking forward to this discussion, gaining insights on the available global partnerships for developing economies especially the sub Saharan Africa while learning from the experts. #RevenueMobilization #SustainableDevelopment #IMF

Macroeconomic stability as a public good. Last week, Moody’s upgraded NICARAGUA’s credit rating to B2 Stable Outlook. The agency recognized government efforts to strengthen the sovereign's credit profile. This has been possible due to massive fiscal & external buffer accumulation, and due to authorities’ endeavors to diversify investment and external financing options. Prudent policy mix and resilience to shocks have also been determinant. This view aligns with other agencies and MDB’s assessments that have underlined that Nicaragua’s macroeconomic performance has surpassed their expectations.

Reinventing international development governance frameworks have been talked about since the turn of the century with the MDGs and now the SDGs with remarkably little success particularly for Low Income Small States. Debt to GDP ratios are extremely high and the availability of development finance is directly linked to debt levels of these LDCs.