Cote D’Ivoire’s Default Remedy Dalliance

Cote d’Ivoire external bonds rose above 50 as the IMF resumed a $600 million credit facility with one-fifth the amount immediately available, even as the Finance Minister pushed the first repayment date on missed interest coupons since early this year to the middle of 2012. It also offered interim debt service relief as a new accord is negotiated with Paris Club bilateral creditors as part of a longstanding HIPC completion point push. Former President Gbago and his allies face trial although international human rights investigators found violations on both sides during the civil war. A reconciliation commission will convene after parliamentary elections in December as security forces try to reassert command over the north-south geographic and tribal divide. A more comprehensive restructuring on commercial debt principal has not been ruled out as economic indicators point to a 6 percent GDP decline this year on inflation around the same range, and state banks suffer from spiking NPLs. Their asset side, with large government securities concentration, was saved from further calamity when the West African central bank stepped in as a buyer, also supporting prices on the Abidjan-based regional bourse. Cocoa trade with big multinational buyers is again on stream after the brief boycott, and sector reform is a key structural aspect of the Fund accord, with President Ouattara’s advisers leaning toward a public-private mix which could inject efficiencies, while bringing in additional revenue for the chronic budget and current account gap. Anti-child labor activists have also demanded detailed monitoring and reporting of field practices, with US-listed companies facing possible supply chain verifications as with Congo’s minerals, where a conflict-free mandate was inserted in the Dodd-Frank law.

Another Sub-Sahara issuer joined the global sovereign ranks as Namibia came to market for $600 million, with neighboring South African institutions eager bidders. German vestiges there have inspired fiscal and monetary discipline, and the post-independence period saw an early example of peaceful transfer of power. Angola, with its own national liberation movement legacy, is often listed as a next candidate after getting the latest tranche of its $1 billion IMF loan conditioned on greater oil earnings transparency. Nigeria could come soon with a diaspora-targeted instrument championed by the Finance Minister when she was at the World Bank. Fitch boosted the outlook on the BB-minus rating to stable with the smooth election aftermath, and the central bank has hiked benchmark rates by several hundred basis points at a clip to defend the naira at 150-55 to the dollar and limit inflation to single-digits. A sovereign wealth fund with a professional board of directors with an initial $1 billion endowment is to replace the mishandled excess crude account which was often described as crude in its excesses.