pdf Why the need for a pharmaceutical initiative anchored on the AfCFTA? (894 KB) Extracts from the technical paper prepared for the Third Africa Business Forum (UNECA)

This innovative AfCFTA-anchored pharmaceutical project has key objectives to support attainment of the SDGs and improve the African governments’ fiscal space. The initiative also demonstrates a more strategic role for the private sector to play in both the supply and demand sides of provision of health care. The creation of single economic space under the AfCFTA allows more secure logistics and a controlled environment for procurement and distribution. The pilot project proposes a regional pooled procurement arrangement, which can also help tackle the infrastructure, data and logistics needs of the continent. Once this arrangement has been set up, it will provide for the safety, security and quality of products procured and distributed.

The second objective of setting up more local pharmaceutical production is to incentivize and engage local pharmaceutical manufacturers across the continent on the supply side of the project. This builds on the Pharmaceutical Manufacturing Plan for Africa. The preliminary data currently available reports that local manufacturing in the 10 countries (see below) is extremely low, with the exceptions of Ethiopia and Kenya. The number of recognized pharmaceutical manufacturers in the region is estimated at 50 but approximately 30 of these are based in Kenya. Ethiopia supplies 20% of domestic consumption but with limited product portfolios (see Box 2). [Companion paper: Disruptive pharmaceutical and finance initiative - AfCFTA and AMA game changers. Note: The pilot countries are Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, and IGAD]

Statement by South Africa’s DTI: Designations of developing and least- developed countries under the Countervailing Duty Law by the USTR (DTI)

Now, the new USTR designation adds to the GNI measure the following criteria to determine which WTO Members will be considered developed or developing for the purposes of CVDs under US law. WTO Members accounting for 0,5% or more of world trade; Organisation for Economic Co-operation and Development Members and those in accession; all EU Member States; Members of the G20; and WTO Members who did not declare themselves to be developing countries during their WTO accession process will be treated as developed. In other words, the 1% ad valorem and 3% negligibility thresholds will now apply to an additional 34 developing countries, including South Africa. The implications of this change in the US application for South Africa will need further assessment. However, as the South African Government does not provide subsidies to industry or agriculture that are illegal under the terms of the WTO SCM, the new USTR designation should have no direct impact.

The change in designation, however, may not be unrelated to US efforts at the WTO over the past two years to restrict the application of the principle of special and differential treatment that provides all developing countries to flexibilities in WTO negotiations. The US has requested many developing countries, including South Africa, to forgo such flexibility in future negotiations. It should be recalled that under the Uruguay Round negotiations, South Africa was treated as a developed country and was required to undertake deep and wide tariff reductions that have contributed to deindustrialisation and high unemployment in South Africa. South Africa and many other developing countries have not been prepared to forego SDT in future negotiations based on the experience of the Uruguay Round outcomes.

Is the time ripe for US-Egyptian free trade agreement? (Al-Monitor)

Comments by the top US diplomat in Cairo have renewed hopes among Egyptians for the potential of a long sought bilateral free trade agreement. US Ambassador to Cairo Jonathan Cohen said Jan. 28 that negotiations at the official government level between Egypt and the United States are scheduled to begin next year on a bilateral free trade agreement. Cohen’s announcement came on the sidelines of the conference of the American Chamber of Commerce in Egypt. He said that the discussions between the two countries on the free trade agreement are in the best interest of both sides, recalling the countries’ strong strategic relations dating back more than 41 years. Washington and Cairo have been engaged in talks on a free trade agreement — to varying degrees of intensity — for the better part of two decades. So far, however, a deal has remained elusive.

With lending to Africa up, Malpass splits World Bank Africa department in two (Devex)

The World Bank will split its regional department for Africa in two, effective later this year, World Bank President David Malpass said Wednesday. Since 2000, the 54 countries of Africa have been internally divided at the World Bank into a regional department dubbed “Middle East and North Africa” and another simply called “Africa” that included all of sub-Saharan Africa. According to an internal announcement obtained by Devex, as of 1 July 2020, the Africa department will be divided into “Western & Central Africa” and “Eastern & Southern Africa.” Each new department will be led by its own vice president. In an interview with Devex, Malpass described the move as a “recognition of the big challenges Africa is facing” and an alignment of the World Bank’s personnel and management with its growing loan portfolio for Africa. Hafez Ghanem, the bank’s current vice president for Africa, will become vice president for Eastern & Southern Africa. Ousmane Diagana, currently the bank’s vice president for human resources and a former World Bank country director for Mali, Niger, Chad, and Guinea, has been named to lead the Western & Central Africa unit. [Re-upping the recent World Bank report Borrow with Sorrow? The changing risk profile of Sub-Saharan Africa’s debt]

AfDB rebuts World Bank President’s comments on Africa’s debt profile (AfDB)

In several news reports, World Bank President David Malpass was recently quoted as saying some Multilateral Development Banks, including the African Development Bank, have a tendency to lend too quickly and in the process, add to the continent’s debt problems. This statement is inaccurate and not fact based. It impugns the integrity of the African Development Bank, undermines our governance systems, and incorrectly insinuates that we operate under different standards from the World Bank. The very notion goes against the spirit of multilateralism and our collaborative work. These are the facts (extracts):

Given substantial financing needs on the African continent, the development assistance of the African Development Bank, the World Bank and other development partners remain vitally important, with increasing calls for such institutions to do even more.

The lending, policy, and advisory services of these development institutions in their respective regions are often coordinated and provide substantially better value-for-money to developing nations, compared to other sources of financing. As a result of the African Development Bank’s AAA-rated status, we source funding on highly competitive terms and pass on favorable terms to our regional member countries. Combined with other measures to ensure funds are used for intended purposes, it helps regional member countries finance debt and development in the most responsible and sustainable way.

With regard to the need for better lending coordination and the maintenance of high standards of transparency, the African Development Bank coordinates lending activities, especially its public sector policy-based loans, closely with sister International Financial Institutions (notably the World Bank and the IMF). This includes reliance on the IMF and World Bank’s Debt Sustainability Analyses to determine the composition of our financial assistance to low-income countries; and joint institutional approaches for addressing debt vulnerabilities in the African Development Fund and International Development Association countries.

In addition, country economists of the African Development Bank fully participate in regional and country level IMF Article 4 missions. Contrary to suggestions, these are just a few concrete examples of historic and ongoing coordination between sister Multilateral Development Banks, IFIs, and development partners. The African Development Bank is committed to the development of the African continent. It has a vested interest in closely monitoring debt drivers and trends in African countries as it supports them in their efforts to improve the lives of the people of Africa.

World Bank chief: some development banks worsening poor country debt burdens (Reuters)

World Bank President David Malpass on Monday chided other development banks for lending too quickly to heavily indebted countries, saying some were helping worsen already-challenging debt situations. Malpass said at a World Bank-International Monetary Fund debt forum in Washington that the Asian Development Bank, the African Development Bank, and the European Bank for Reconstruction and Development were contributing to debt problems. “We have a situation where other international financial institutions and to some extent development finance institutions as a whole, certainly the official export credit agencies, have a tendency to lend too quickly and to add to the debt problem of the countries,” Malpass said. He said the Asian Development Bank was “pushing billions of dollars” into a fiscally challenging situation in Pakistan while the African Development Bank was doing the same in Nigeria and South Africa.

Malpass said there needed to be more coordination among international financial institutions to coordinate lending and maintain high standards of transparency. “And so we have a very real problem of the IFIs themselves adding to the debt burden and, and there’s pressure then I think on the IMF to sort through it and look at the best interest for the country,” he said. Malpass also said that the new Beijing-led Asian Infrastructure Investment Bank was seeking to develop lending standards that were equal to those of the World Bank and was causing fewer problems than some of the more traditional development lenders.

The evolution of public debt vulnerabilities in lower income economies (IMF)

On 22 January 2020, the Executive Board of the IMF discussed a joint IMF-World Bank staff paper assessing the evolution of debt developments and emerging debt issues in lower-income economies (LIEs) since 2017. Executive Directors welcomed the opportunity to discuss the evolution of public debt vulnerabilities in LIEs. They noted that accommodative global financial conditions and expanded funding from non-Paris Club creditors have allowed LIEs to mobilize larger volumes of external financing. This has provided the opportunity to help finance important development spending. At the same time, Directors highlighted the challenge for countries to strike a balance between boosting development spending and containing debt vulnerabilities. Extract:

Commercial creditors are playing an increasingly important role as a source of bond debt. Bond issuance has continued to grow since 2016, with the share of bond debt in LIEs economies rising by an average of two percentage points of GDP per annum on new entrants and larger issuances. Since 2010, foreign currency denominated bonds have been the fastest growing source of financing for frontier LIEs, mainly in sub-Saharan Africa. Eurobond issuances have almost tripled from an average of $6bn per annum during 2012–16 to about $16bn per annum in 2017–18 and several countries have become new issuers. Participation is still concentrated, however, with only 22 issuers among LIEs, of whom the top ten account for almost 90% of borrowing since 2004. For some of these economies, relative to their size, issuance levels are similar to those of emerging market economies. Annex 2 discusses some key aspects of frontier bond markets. [Note: The 2 January 2019 version of the above report can be accessed here]

Emerging and developing economies: Ten years after the global recession (World Bank)

Although emerging market and developing economies (EMDEs) weathered the global recession a decade ago relatively well, they now appear less well placed to cope with the substantial downside risks facing the global economy. In many EMDEs, the room for monetary and fiscal policies to respond to shocks has eroded; underlying growth potential has slowed; and the momentum for improving policy frameworks, institutions, and business climates seems to have slackened. The experience of the 2009 global recession highlights once again the critical role of policy room in shielding economic activity during adverse shocks. The subsequent decade of anemic growth underlines the need for sound policy frameworks, institutions, and business environments to promote sustained growth. With the global growth outlook weakening and vulnerabilities rising, the policy priority for EMDEs is now to improve resilience to shocks and to lift long-term growth prospects.

Somalia and the Enhanced Heavily-Indebted Poor Countries Initiative: IMF’s preliminary document

Somalia has an historic opportunity to turn the page on decades of conflict, fragility and state fragmentation, and embark on a trajectory towards poverty reduction and inclusive growth. For over two decades, Somalia has experienced protracted conflict and fragility, the collapse of rule of law, institutions, basic public services and the social contract, resulting in the impoverishment of millions. The 2012 Provisional Constitution established a federal political structure, including a parliament, the Federal Government of Somalia and the Federal Member States. The sustained political, economic and institutional reforms undertaken since 2016 have succeeded in rebuilding core state capabilities. [IMF, World Bank consider Somalia eligible for assistance under the Enhanced HIPC Initiative]

Tanzania signs $1.46bn loan for standard gauge railway construction (Reuters)

Tanzania has signed a $1.46bn loan agreement with Standard Chartered Bank Tanzania to fund the construction of 550km (341.75 miles) of standard gauge railway running between between Dar es Salaam and Matukupora in central Tanzania. “Standard Chartered Tanzania acted as global co-ordinator, bookrunner and mandated lead arranger on the facility agreement that is the largest foreign currency financing raised by the ministry of finance to date,” the Finance and Planning Ministry and Standard Chartered Bank Tanzania said in a statement. It added that the biggest part of the financing would come from Sweden’s and Denmark’s export credit agencies.

“Nigeria does not have the capacity to borrow $23bn” (Daily Trust)

Financial analyst and managing director, Cowry Asset Management Limited, Mr Johnson Chukwu has said the country does not have the capacity to borrow $23 billion as currently canvassed by the federal government . Chukwu disclosed this in an exclusive chat with Daily Trust yesterday in Lagos while responding to question on the borrowing plan of the federal government. The federal government, penultimate Tuesday, sought the approval of Senate for concessionary external borrowing of $22.8 billion for development of infrastructure across the country. [Nigeria’s central bank introduces longer-term contracts on the naira to lure investors, shore up FX reserves]

Pompeo makes first trip to Africa amid conflicting US signals (Reuters)

US secretary of state Mike Pompeo on Saturday begins a trip to Senegal, Angola and Ethiopia, chosen for their leaders’ attachment to democratic values in a continent that has seen backsliding in recent years. “These three countries are major contributors to regional stability. Also, the countries are benefiting from dynamic leadership,” a senior state department official said on customary condition of anonymity. The official said that a “major theme” will be the growing role of China, which has poured money into the continent as part of its global blitz of infrastructure spending. China has invested especially heavily in Angola, which racked up an estimated $25bn in debt to Beijing to be repaid with oil shipments.