West Africa’s Ebola Spike Span
West African low-income economies at the origin of the epic Ebola virus outbreak claiming already over 1000 lives with its steep mortality rate resorted to high-yield emergency Treasury-bill borrowing as they awaited $250 million in international donations and tried to keep existing IMF credit programs on track. Their currencies continued slight falls against the dollar and euro as GDP growth projections already under pressure from lower commodity prices were pared back. Normal commercial and travel activity has been suspended as chronically under-resourced health facilities face equipment and personnel shortages for handling the disease. Patient isolation has invited street violence as police are redeployed to houses and hospitals and families are angered by earning and access restrictions. The World Bank had just hailed Liberia’s institutional and policy strides among African fragile states as the crisis erupted, with thinly traded secondary debt after official write-offs selling off. Slower mining production was set to reduce growth to 6 percent as agriculture and construction looked to pick up and inflation touched double-digits. The fiscal deficit missed the 5 percent of GDP target and the current account gap also widened on remittance decline, with reserves less than three months imports. Private credit expanded an annual 25 percent from a thin base but NPLs are at 15 percent and the central bank still lacks autonomy pending a new law which may be delayed until October parliamentary elections. Monetary policy had been loosened before the virus scare and the Sirleaf government had received Fund waivers for non-concessional external debt for infrastructure purposes. With such outlays the risk of distress could worsen to “moderate,” according to a July assessment. Guinea was the source of the latest Ebola wave and just completed the first stage of post-2010 military transition with presidential elections due in 2015. Growth was projected at 3-4 percent with lack of electricity and complications in approving the Simandou iron ore venture after previous bribery allegations against foreign partners. New bauxite blocks will bring in “exceptional” revenue according to the Fund’s latest checkup and interest rates were cut below 15 percent. The cap on Treasury bill yields was lifted prior to recent auctions and the central bank raised bank capital requirements and revised insurance industry guidelines. Commercial loans were authorized to finance a transmission line to the capital from a hydroelectric dam as previous private creditors with $65 million in arrears have yet to grant HIPC relief.
Sierra Leone had agreed to slash domestic debt to 10 percent of non-iron output as short-term yields calmed to single-digits with pledges of future public sector wage restraint. Two-year Treasury offerings and foreign opening have been postponed with the Ebola tragedy and the parallel foreign exchange premium has again jumped after “broad stability” the IMF notes. A new airport project estimated at $200 million may now be too expensive despite the 2 percent 20-year terms proposed by an international bank despite last year’s post-conflict 15 percent growth with combined physical and performance maladies, it suggests.
