The new debt trap?

External debt levels stable? 2

Slight increase in debt payments 3

Significant increase in lending in recent years 4

Projections made in 2013/2014 for increasing debt payments 5

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

Analysis of nine countries Growing faster (average annual growth rate 4.74% 2008-2013, 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

Commodity dependence has not fallen 8

Since 2014: Commodity price fall 9

Since 2014: dollar increase in value 10

Currency depreciations since start 2015 Ghanaian Cedi: Down 39% against the dollar Mozambique Metical: Down 47% against the dollar Tanzanian Schilling: Down 28% against the dollar Zambian Kwacha: Down 46% against the dollar 11

Ghana’s rapidly increasing debt 12

Who Ghana’s debt is owed to 13

Interest cost of the debt Interest rates: Eurobonds and other private external: 7.9% - 10.75% Cedi debt: 7% (average real interest rate) Other governments: 4.5% estimated Multilateral institutions: 0% - 2% 14

Projected Ghana government external debt payments 15

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

Real government spending projected to fall 17

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

The elephant or iceberg in the room: Public-private partnerships 19

Conclusions No widespread debt crisis yet, but some countries at or approaching Countries most likely to be affected supposed star performers of high growth linked to high commodity prices Question marks over how well lending has been used: call for more transparency and accountability from borrowers and lenders Lack of debt restructuring mechanism, along with IMF bailouts, retains moral hazard, encouraging reckless lending during ‘boom times’ 20