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Africa This Week
  • Mozambique peace deal signed ahead of elections in October, but instability factors persist
  • IMF releases USD 2 billion loan tranche to Egypt after the implementation of visible economic reforms
  • Protests following re-election of Malawi’s president resume, with demonstrators calling for dismissal of electoral commission chair
  • Fixed prices for cocoa in Côte d’Ivoire set after a month-long ban of sales to international buyers
  • Tunisian presidential candidates crystalise with former president and current speaker of parliament at the forefront
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Ethiopia Coup Attempt Story, Zimbabwe’s Currency Reform And Mauritania’s Presidential Election: Africa This Week
  • The failed military uprising in Ethiopia’s Amhara state will cast a deep shadow over Ethiopian politics going forward. Since Prime Minister Abiy Ahmed came to power just over a year ago, his radical political and economic reforms have opened up a political space that was formerly very closed. While this has reduced the repressive and interventionist role of the state in policing society, it has also stirred ethnic tensions, both between neighbouring regions and between regional and federal actors. Furthermore, vested interests in the old politico-military guard who have seen their powers curtailed by Abiy’s new form of government are disgruntled and potentially troublesome. These conditions make for a dangerous mix that Abiy is having to navigate. The Prime Minister is a committed reformer and is unlikely to backtrack on his reform agenda. But he will face tough decisions around the extent to which he allows political space to those who are challenging the integrity of the state system and the authority of his government – especially with elections on the horizon in 2020. In the short term we can expect a firm military and intelligence response to the tragic violence over the weekend, while Abiy will also likely increase his own personal security measures. Beyond this, Abiy will likely push for an inclusive dialogue to address some of the root causes of unrest, while reshuffling the pack around him to gain greater loyalty and support.
  • Zimbabwe’s decision to ban the use of foreign currencies for local purchases as a means of stemming spiralling inflation is unlikely to provide the immediate solution the government craves. Confidence in the Zimbabwean currency (the RTGS dollar) remains low and the balance of trade remains weak amid broader floundering economic performance. So while the banning of foreign currency purchases may give the authorities greater control over some of their monetary levers, it will not necessarily stabilise the currency – particularly if the government resorts to printing money to fuel liquidity as it did in the past. In the long run, with the government having a limited buffer to protect the RTGS dollar and the economy still in the doldrums, there remains a credible risk that Zimbabwe will go the opposite direction and be forced to re-dollarise its economy.
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West Africa inches closer to single currency, US Embassy accepts new Kenyan notes & Algerian army chief calls for elections: Africa This Week
  • Efforts to align at a ministerial level on a West African single currency form part of a wider push for stronger regional integration but the process of adoption is likely to drag considerably beyond the current envisaged timelines, given the tough convergency standards set and the need to secure political buy-in from heads of state. As such, the 2020 launch plan for a 15-state single currency looks unrealistic. Convergency requirements would see all member states achieve an inflation rate below 5% (inflation in Ghana and Nigeria has tended towards double digits), and a budget deficit-to-GDP ratio of 4% or lower. Yet public debt is on the rise and governments are continuing to plug spending gaps with debt so this convergency also seems unlikely. As a starter, a failure to adapt the convergency criteria could see the currency project flounder.
  • Several Francophone West African states already share the Euro-pegged CFA franc currency. This has helped them to ensure currency stability and manage inflation. However, critics point to the fact that these countries have not out-stripped growth in other neighboring states, and have also found that their exports are uncompetitive due to the inflated strength of their currency, while intra-regional trade between CFA franc using states has not picked up substantially, pointing to other systemic issues creating barriers to regional trade. In fact, the vast majority of trade tends to be outside of Africa due to import dependence and economic models oriented towards the export of raw materials. This will not change overnight. Nevertheless, the wider ambitions of the West African single currency and its ability to create a more harmonised and stronger trading bloc are gaining growing political backing since the concept was conceptualised almost two decades ago. While a regional Central Bank would gain greater monetary control than the pegged CFA franc zone provides, other countries like Nigeria and Ghana would be divesting sovereignty on their monetary levers to this regional body. And while this could help regularise and control certain monetary processes, reducing avenues for corruption, it remains to be seen if political leaders will all align behind this. Yet while 2020 may be aspirational and the future is by no means certain, efforts to regionally harmonise and integrate are likely to continue in the coming years.
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