1. The new debt trap?

2. External debt levels stable?2

3. Slight increase in debt payments3

4. Significant increase in lending in recent years4

5. Projections made in 2013/2014 for increasing debt payments5

6. Nine countries most exposed to foreign lending
Significant net external debt (over 30% of GDP)
Significant projected future government external debt payments (over 15% of revenue)
Significant and sustained current account deficits (over 5% of GDP)
Bhutan, Ethiopia, Ghana, Lao, Mongolia, Mozambique, Senegal, Tanzania, Uganda 6

7. Analysis of nine countries
Growing faster (average annual growth rate 4.74% , compared to 3.64%)
Not reducing poverty faster. In five of the nine, people living in poverty increasing. Only Bhutan, Ghana and Mongolia reducing poverty at a faster rate than the average
Inequality increasing in eight of nine (Mozambique exception, but already most unequal)
Commodity export dependence has not fallen 7

8. Commodity dependence has not fallen8

9. Since 2014: Commodity price fall9

10. Since 2014: dollar increase in value10

11. Currency depreciations since start 2015
Ghanaian Cedi: Down 39% against the dollar
Mozambique Metical: Down 49% against the dollar
Tanzanian Schilling: Down 28% against the dollar
Zambian Kwacha: Down 46% against the dollar 11

12. Ghana’s rapidly increasing debt12

13. Who Ghana’s debt is owed to13

14. Interest cost of the debt
Interest rates: Eurobonds and other private external: 7.9% % Cedi debt: 7% (average real interest rate) Other governments: 4.5% estimated
Multilateral institutions: 0% - 2% 14

15. Projected Ghana government external debt payments15

16. Assumptions for sustainability
IMF view that external debt is sustainable based on assumptions:
$GDP growth averaging 8.2% a year until 2035
Government $ revenue grows in line with GDP
A fall in average interest rate on external debt from 5.1% to 4.1%
Continual primary budget surpluses 16

17. Real government spending projected to fall17

18. External bond refinancing could be difficult
Most recent Eurobond autumn 2015:
$1bn borrowed at 10.75%
But World Bank guaranteed $400m
This implies cost would have been 16.25% without guarantee
As long as government keeps paying interest until 2025, lenders will have made a profit 18

19. Mozambique and the hidden debt19

20. Mozambique and the hidden debt
1. $726.5 million Eurobond: issued through Credit Suisse and VTB Bank in English law, London branches. It was not approved by the Mozambique parliament.
2. $597 million direct loan: 81% of the loan was from Credit Suisse, 19% VTB. English law, London branches. It was not approved by the Mozambique parliament.
3. $535 million direct loan from VTB. English law, London branches. It is now thought to be in default. It was not approved by the Mozambique parliament. 20

21. Mozambique and the hidden debt21

22. New debt crisis?
1. Are Ghana and Mozambique the start of a new crisis or individual cases? Other recently agreed IMF bail outs: Sri Lanka, Tunisia. Zambia to come?
2. Wide range of creditors in both cases.
3. Dominance of English law for impoverished countries private external debts. 95% of sub-Saharan Africa (excluding South Africa) bonds owed under English law. 22