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issue 553 | 07 Jul 2024

World

Green bonds rise and ESG funds suffer amid scrutiny on sustainable investment products

Global green bond issuance hit a record USD195.9-billion in the second quarter of 2024, attracting higher inflows compared to newer forms of sustainable debt. Meanwhile, environmental, social, and governance (ESG) equity funds and SLBs have faced significant outflows and declines, influenced by the United States anti-ESG movement and greenwashing concerns. Legal experts note that green bonds are seen as the most credible form of sustainable investment due to their established frameworks and transparency. However, there is still scrutiny, and a shift towards "deep green bonds" aligned with the European Union Taxonomy is emerging. Despite this, experts caution that SLBs and other sustainable finance instruments should not be overlooked, as they can effectively integrate sustainability into broader financing strategies.

Source: ENS

East / Southern Africa

Inclusive Digitalization in Eastern and Southern Africa Program

The Inclusive Digitalization in Eastern and Southern Africa (IDEA) Program will increase access to the internet and the inclusive use of digitally enabled services. With USD2.48-billion in funding from the International Development Association and the International Bank for Reconstruction and Development, the IDEA Program aims to bring together 15 countries and regional economic communities to tackle challenges such as limited internet coverage, inadequate data infrastructure, low usage due to high cost of data and devices, limited digital skills, cybersecurity risks and data protection. The IDEA Program will contribute to sustainable economic growth through long-term cost savings, efficiency, and productivity gains, fuelled by greater digital adoption by citizens, businesses, and governments across the region. The IDEA Program will be implemented in phases over eight years with Angola, the Democratic Republic of the Congo, and Malawi participating in the first phase. Additional countries and regional bodies are expected to join in the subsequent phases based on their eligibility and readiness. The Common Market for Eastern and Southern Africa will spearhead the regional coordination of the IDEA Program.

Source: World Bank

Angola / Côte d'Ivoire

Angola, Côte d'Ivoire sign 14 cooperation agreements

Angola and Côte d'Ivoire have signed 14 agreements aimed at enhancing bilateral cooperation between the two countries. Signed during a state visit by Angola’s President João Lourenço to Abidjan, Côte d'Ivoire on 27 June, the bilateral agreements cover several areas including agriculture, mineral resources, oil and gas, health, scientific research and tourism. Agreements were also signed in the fields of sport, culture, industry, water resources management, military and technical cooperation. “I am delighted with the signing of the 14 agreements, and I would like to reaffirm the Ivorian Government’s determination to work towards strengthening and diversifying bilateral relations through the agreements we have just signed,” stated Côte d'Ivoire’s President Alassane Ouattara. The agreements build upon existing trade relations between the two countries. Notably, Côte d'Ivoire exports bitumen, green coffee, cotton and rubber to Angola while importing gas cylinders, liquefied butane and various other consumer products from its southern African counterpart.

Source: Energy Capital & Power

Benin

IMF Executive Board completes fourth review of EFF and ECF, first review of the RSF, and concludes 2024 Article IV consultation

On Thursday, 27 June, the Executive Board of the International Monetary Fund (IMF) concluded the 2024 Article IV consultation with Benin and completed the fourth review under the 42-month blended Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) arrangements, and the first review under the Resilience and Sustainability Facility (RSF) arrangement. The EFF/ECF was approved by the IMF Executive Board in July 2022 and complemented by the RSF in December 2023. The completion of the reviews allows for the immediate disbursement of SDR31.2-million (about USD41-million) under the EFF/ECF – bringing total disbursements under the programme to SDR400.2-million (about USD526-million) – and of SDR19.8-million (about USD26-million) under the RSF arrangement. The executive board also approved the modification of the quantitative performance criterion on new debt contracted or guaranteed by the government for 2024, with public debt remaining at moderate risk of debt distress.

Source: IMF

Ethiopia

Stakeholders join forces to advance Ethiopia's AfCFTA Implementation Strategy

The Ethiopian Ministry of Trade and Regional Integration (MoTRI) in collaboration with the Policy Studies Institute (PSI) with support from the United Nations Economic Commission for Africa (ECA) organised a National Forum for the development of the National African Continental Free Trade Area (AfCFTA) Implementation Strategy. The event gathered over 70 participants from various sectors, including private industries, government representatives, academia, youth, women, and developmental partners. In his opening remarks, Gebremeskel Chala, Minister of MoTRI reiterated the government's commitment to fostering open minds for ideas and open markets for trade. He also expressed appreciation for PSI’s involvement and ECA's assistance in developing the Ethiopia National AfCFTA Implementation Strategy. The minister highlighted that the forum, with its wide-ranging stakeholder representation, is a crucial step towards establishing a successful National AfCFTA Implementation Strategy. Beyene Petros, the Director General of PSI, emphasised the importance of full commitment and ownership from all stakeholders in the development and implementation of the strategy.

Source: ECA

Ethiopia / South Sudan

Ethiopia, South Sudan to build 220 km cross-border road

Ethiopia and South Sudan are set to build a 220 km cross-border road, following a USD738-million financial agreement signed in May 2023. South Sudan's Transitional National Legislative Assembly recently ratified the Ethiopia-South Sudan financial agreement to build a cross-border highway, the Ethiopian Ministry of Foreign Affairs said in a statement recently. The ministry said the project aims to enhance connectivity and bolster economic ties between the two neighbouring countries, underscoring the growing cooperation and mutually beneficial relationship between Ethiopia and South Sudan. According to the financial agreement, Ethiopia will cover the cost of the road project. The deal designates South Sudan as the borrower and Ethiopia as the financier, and the repayment involves crude oil from South Sudan to Ethiopia. The construction of the road project will start upon the final authorisation by South Sudanese President Salva Kiir Mayardit. The road on the South Sudanese side will connect Paloich, Maiwut and Pagak to Ethiopia's border areas.

Source: The EastAfrican

The Gambia

World Bank Board approves additional USD35-million to improve essential health services in The Gambia

The World Bank has approved an additional USD35-million in financing from the International Development Association to enhance the quality and utilisation of essential health services and support the national public health preparedness system in The Gambia. The board previously approved USD84.5-million to The Gambia Essential Health Services Strengthening Project. The additional financing will support the completion of the construction of health facilities, the implementation of the national health insurance scheme, and the interoperability of the electronic civil registration and vital statistics system with the information systems of other sectors. “This third additional financing will scale up and advance the quality of essential health services in The Gambia. It underscores our commitment to continuously improve healthcare access and quality for all,” said Franklin Mutahakana, World Bank Group Resident Representative. “This additional funding is vital to the government,” said Task Team Leader, Teegwende Valerie Porgo.

Source: World Bank

Ghana

IMF Executive Board completes the second review under the ECF arrangement with Ghana

On Friday, 28 June the Executive Board of the International Monetary Fund (IMF) completed the second review of Ghana’s USD3-billion, 36-month Extended Credit Facility (ECF) arrangement, which was approved by the board in May 2023. Completion of the second ECF review allows for an immediate disbursement of SDR269.1-million (about USD360-million), bringing Ghana’s total disbursements under the arrangement to about USD1.6-billion. Ghana's economic reform programme is delivering on its objectives. Following acute economic and financial pressures in 2022, the fund-supported programme has provided a credible anchor for the government to adjust macroeconomic policies and implement reforms to restore macroeconomic stability and debt sustainability, while laying the foundations for higher and more inclusive growth. These efforts are paying off, with growth proving more resilient than initially expected, inflation declining at a faster pace, and the fiscal and external positions improving. The medium-term outlook remains favourable but subject to downside risks – including those related to the upcoming general elections.

Source: IMF

Kenya

Kenya bets on carbon markets in 20-year green growth drive

The government says Kenya is creating an enabling environment to inspire confidence in investors and attract carbon finance in the country’s climate-positive growth drive. Speaking at the Carbon Markets Conference in Nairobi in April, Bianca Gichangi, a Carbon Markets Expert and Adviser at the Office of the Climate Envoy, Executive Office of the President of Kenya, said the country has been active in the carbon markets space for more than two decades and is a leader in Africa with around 23% market share of voluntary carbon credits issued. According to Ms Gichangi, carbon markets are prioritised as a pivotal component of Kenya’s climate-positive growth and carbon credits are envisioned as the next major export. This is why on the path to realising this vision, Kenya has marked notable strides by establishing robust legal and institutional frameworks through amending the Climate Change Act to incorporate carbon markets and is close to finalising regulations that provide clarity on implementation.

Source: Business Daily

Kenya

President Ruto says borrowing only way to plug deficit

Kenyan President William Ruto has said that the country will resort to more borrowing to plug a growing budget deficit after the rejection of the Finance Bill that would have increased tax revenue. Following deadly protests recently, President Ruto declined to sign the Bill and wrote to Parliament to withdraw it. During a recent TV interview, President Ruto said that the failure of the Bill had hurt government efforts to ease the country's debt burden. About 60% of Kenya's revenues go to servicing debt. He said East Africa's largest economy will seek KES1-trillion (USD7.6-billion) from lenders to pay for social services and other programmes. The new taxes would have raised about USD2.7-billion. Law makers had overwhelmingly approved the Finance Bill shortly before protestors stormed Parliament and set sections of it on fire. The protestors say the government should cut corruption and waste instead of raising taxes. President Ruto has promised to reduce the budget of the presidency and to eliminate non-essential expenditure. Kenya's debt stands at over USD80-billion. A large chunk of it is denominated in foreign currency.

Source: Africanews

Kenya / Europe

Kenya to open market for duty-free EU imports after trade deal takes effect

Kenya and the European Union (EU) have enforced a trade deal after a decade of negotiations, opening up the domestic market for tax-free goods from the 27-country bloc after 25 years. The EU-Kenya Economic Partnership Agreement (EPA), which preserves unrestricted access of Kenyan goods to the European bloc except for arms, came into force on Monday, 1 July 2024, Kenya’s Cabinet Secretary for Investment, Trade and Industry Rebecca Miano announced. “The EU-Kenya EPA is one of the most ambitious agreements negotiated between the EU and an African country in terms of promoting economic sustainability. It can serve as a template for other African countries, particularly those in eastern Africa to adapt,” Ms Miano said in a statement. “The agreement includes trade, economic and development cooperation and a chapter on trade and sustainable development which covers provisions on labour issues, gender equality, forestry and environment and the fight against climate change.” The pact, the first trade agreement between the EU bloc and a developing country, ensures Kenya’s largely agricultural produce such as vegetables, cut flowers, fruits, tea and coffee continue to enter the bloc duty-and quota-free. Nairobi, on the other hand, has committed to gradually lower duty on imports from Europe within 25 years after which trade will be liberalised.

Source: Business Daily

Lesotho

Staff concluding statement of the 2024 Article IV mission

An International Monetary Fund (IMF) team led by Mr Andrew Tiffin held meetings in Maseru with the authorities of Lesotho and other counterparts from the public and private sectors and civil society from 3-14 June 2024, as part of the 2024 Article IV consultation. Discussions focused on the mix of fiscal and monetary policies to ensure macroeconomic stability and debt sustainability, as well as the structural reforms needed to create jobs, reduce poverty, and facilitate the transition to private-sector-led growth. IMF staff estimates suggest that real GDP growth picked up modestly in financial year 2023/24 to 2.2%, up from 1.6% in the previous year. In large part, this reflects accelerated construction from the Lesotho Highlands Water Project. However, a decline in competitiveness in the apparel sector and lower diamond prices have depressed exports. Inflation is easing. Headline inflation was 7.1% in April, up from 4.5% in July 2023, but down from a peak of 8.2% in January 2024. The recent increase in inflation is largely due to exogenous factors such as higher regional food prices, elevated transportation costs, and rand depreciation. The impact of these factors is expected to ease going forward.

Source: IMF

Rwanda / Kenya

Rwandan businesses, Kenya Ports Authority partner to ease global supply disruptions

Rwanda’s Private Sector Federation (PSF) and the Kenya Ports Authority (KPA) committed to collaborate in coping with disruptions in the global supply chains. The agreement was reached during a recent Golden Circle breakfast meeting held in Kigali. The meeting themed The Future of Logistics vs. the Ongoing Global Dynamics was attended by bankers, policymakers, logistics professionals, business owners, government institutions, private sector representatives, delegations from Kenya, and staff from the KPA, among others. It aimed at having a clear understanding of the current global trends and establishing clear initiatives to enhance logistics efficiency and resilience through strategic interventions and partnerships that address key challenges. The Acting Chairperson of PSF, Jeanne Françoise Mubiligi, applauded the collaboration between Rwanda and Kenya. She noted that despite the global crises caused by the COVID-19 pandemic and global economic crisis, both countries' businesses and logistics sectors worked hard to overcome these challenges.

Source: The New Times

Somalia

Fostering a vibrant and inclusive private sector is key to Somalia’s resilient growth

Since Somalia’s private sector accounts for an estimated 95% of total jobs created, marshaling the private sector to support the country’s development is critical for reconstruction, transitioning from fragility, and generating more inclusive economic dividends for its people. The country also needs to focus on growth (to avoid falling back into debt), create jobs, and enhance economic opportunities for citizens. Published on Wednesday, 26 June the Somalia Country Private Sector Diagnostic notes that while private businesses have been remarkably resilient and presently provide most of the products and services on offer in the country, Somalia’s productive tradable sectors remain subdued and fall short of providing a strong basis for structural transformation. Furthermore, private sector activity is concentrated on commerce and other, mostly non-tradable, consumption-driven services. This consumption-driven growth often benefits a few firms that leverage their market-dominating positions. Therefore, most Somali firms remain highly disadvantaged, leading to a “missing middle” and lower overall productivity and job generation. The report also finds that low economic integration and a minimal complexity of foreign direct investment weigh on the productivity growth prospects of the Somali private sector, limiting opportunities for trade, technological advancement, and efficient resource allocation.

Source: World Bank

Tanzania

BoT to monitor TIPS services amid cost concerns

The Bank of Tanzania (BoT) has announced plans to begin monitoring service providers on the Tanzania Instant Payment System (TIPS), which have not reduced costs as stipulated in a circular issued earlier this year. A Computer Analyst Programmer in the System Development and Support Department at the BoT, Mr Octalion Urassa, recently told The Citizen during the 48th Dar es Salaam International Trade Fair that so far, all 39 commercial banks and six mobile companies have joined TIPS. He, however, did not reveal what would happen to those financial institutions that were found to be going against the BoT’s directives. “Initially, we started with a pilot project with a few commercial banks and a mobile company, but now all the service providers have been integrated into the system, which will make transactions more transparent,” he said. This comes after BoT issued a circular on fees for the Tanzania Interbank Settlement System (TISS) under the provisions of section 56(3) of the National Payment Systems Act, 2015, and section 6 of the Bank of Tanzania Act, 2006, notifying the providers of the revised TISS fees. “The review, which included consultations with stakeholders, is part of ongoing initiatives aimed at reducing the costs associated with electronic payments, promoting digital payment adoption, and decreasing cash usage,” he said. The new TISS fee schedule took effect on 1 May 2024.

Source: The Citizen

Uganda

Uganda Economic Update: Improving Public Spending on Health to Build Human Capital

The Ugandan economy remains resilient and is growing amid intensifying climate shocks and a challenging global environment. The outlook is positive, buoyed by diversified exports and investments in developing oil export infrastructure ahead of the start of oil production in 2025, according to the new World Bank Uganda Economic Update: Improving Public Spending on Health to Build Human Capital. The report notes that real GDP growth accelerated from 5.3% in financial year (FY) 2022/23 to an estimated 6% in FY2023/24. The low inflation and recovery of real income and employment bolstered consumption, while private investment remained resilient despite tight domestic and global financial conditions. As a result, exports and manufacturing orders increased between August 2023 and May 2024. Per capita income reached about USD980 in FY2022/23, and continued growth will push Uganda closer to the lower-middle-income country threshold. The Uganda Economic Update, now in its 23rd edition, is a twice-yearly analysis of Uganda’s near-term macroeconomic outlook. This edition projects a positive, though fragile, picture over the medium-term, with Uganda’s GDP growing by 6.2% in FY2024/25 and accelerating to more than 7% in the medium-term due primarily to investment in the oil and gas sector.

Source: World Bank

Uganda

Uganda reinstates tax on e-vehicles

Uganda has reinstated a 25% import duty on fully electric vehicles (e-vehicles), hybrid vehicles, and electric motorcycles. “We were allowed to reinstate the import duty on fully built electric bikes, hybrid vehicles, and e-vehicles during the review of the East African Community (EAC) Common External Tariff (CET) in May 2024,” said Moses Kaggwa, Director of Economic Affairs. On paper, EAC partner states should be implementing the new EAC CET 2022 structure without any changes, but Mr Kaggwa notes that industrial development, a need for import substitution, and specific sector protection calls for periodic reviews. Uganda has an ambitious plan of transitioning from traditional gasoline-powered vehicles to electric cars which produce zero tailpipe emissions. This explains why the government-owned car Kiira Motors Corporation is producing more electric buses to be deployed on urban roads and for the export market. For the export market, Uganda has orders for electric and low diesel combustion buses from Tanzania, South Africa, Nigeria, and Eswatini, according to Finance Minister Matia Kasaija.

Source: The EastAfrican

Zambia

IMF Executive Board completes third review under the ECF and approves augmentation of the arrangement

On Wednesday, 26 June the Executive Board of the International Monetary Fund (IMF) completed the third review of Zambia’s 38-month Extended Credit Facility (ECF) arrangement and approved an augmentation of SDR293.46-million (about USD385.7-million). Completion of the review allows for an immediate disbursement of SDR433.34-million (about USD569.6-million), bringing Zambia’s total disbursement so far under the ECF-supported programme to SDR852.98-million (about USD1.1-billion). Zambia’s ECF arrangement was approved on 31 August 2022, for SDR978.2-million (100% of quota, or about USD1.3-billion). The augmentation approved on 26 June increases access to SDR1271.66-million (130% of quota, about USD1.7-billion,). The programme supports Zambia’s home-grown Eighth National Development Plan that seeks to entrench macroeconomic stability, attain debt and fiscal sustainability, enhance public governance, and foster inclusive growth to improve the livelihood of the Zambian people, especially the vulnerable.

Source: IMF

Zimbabwe

IMF staff completes 2024 Article IV mission to Zimbabwe

In light of new policy developments, an International Monetary Fund (IMF) staff team led by Mr Wojciech Maliszewski conducted a second mission to Harare from 18-27 June 2024, to conclude the 2024 Article IV consultation. At the conclusion of the IMF mission, Mr Maliszewski issued the following statement, in part: “Despite headwinds, Zimbabwe’s economy continues showing resilience. Growth is expected to decelerate to about 2% in 2024 (from 5.3% in 2023), as the country faces a devastating El Niño-induced drought. Higher import bills are also worsening the balance-of-payments outlook. But growth is expected to recover strongly in 2025 to about 6%, supported by a rebound in agriculture and ongoing capital projects in manufacturing. Against this background, the Reserve Bank of Zimbabwe introduced in April 2024 a new currency – the Zimbabwe Gold (ZiG). The ZiG official exchange rate has so far remained stable, ending a bout of macroeconomic instability in the first three months of the year (when the Zimbabwean dollar depreciated by about 260%). Assuming that macro-stabilisation is sustained, cumulative inflation in the remainder of the year is projected at about 7%.”

Source: IMF