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Global Insight Analysis: Debt Relief Results Vary Among African Nations
Global Insight's Expanded Sovereign Risk Service Assesses Credit Worthiness of 202 Countries
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Waltham, MA, 2 May, 2006 — Global Insight, the world's leading company for economic and financial analysis and forecasting, today released its analysis of the impact of G8 Debt Relief Measures* on the balance sheets of certain African countries. The Global Insight analysis finds that of all the sub-Saharan nations receiving debt relief, only a handful—Ghana, Tanzania, Senegal, and Zambia—are poised to leverage these debt-relief measures to materially benefit their economies.
Global Insight's in-depth analysis of these G8 relief measures is part of its newly expanded Sovereign Risk Service. The Sovereign Risk Service provides the most complete coverage available from any source covering 202 countries. Global Insight's expert team analyzes a nation's credit-worthiness by assessing the country's financial position, state of the economy, and the political environment.
Four African Countries in Prime Position to Capitalize on G8 Debt Relief: Ghana, Tanzania, Senegal, and Zambia, are in prime position to capitalize from G8-sponsored debt relief due to relatively good governance and economic potential to capitalize on the debt relief to improve their overall credit profiles in the medium-to-long term. However, success is not guaranteed and remains contingent on sound performance. Global Insight's analysis shows that in spite of maximum debt relief, other countries still face the overwhelming constraints of weak governance, inadequate infrastructure, and more limited economic potential. Even for the very weakest, debt relief will significantly aid poverty-reduction efforts.
Jan Randolph, Head of Sovereign Risk at Global Insight, stated, "A medium-term sovereign risk rating upgrade will facilitate the reintroduction of some of these African countries to global credit markets, which is needed for the financing of international trade and key infrastructure necessary for self-sustaining development. This should, in turn, lead to long-term increases in foreign capital inflows, further earnings base expansion, and an overall strengthening of international foreign exchange positions. This favorable development scenario is not guaranteed by debt relief alone, but may prove the catalyst for recovery in some instances."
Nigeria is the Controversial Big Winner from debt deal with Paris Club of Creditors. Randolph continued, "In a related development, Nigeria—not classified as belonging to a group of Heavily Indebted Poor Countries (HIPC) because of its large oil reserves—has just finalized a debt deal with the Paris Club of Creditors that reduced its external debt from more than US$30 billion to around US$5 billion. With foreign exchange reserves expected to reach US$50 billion by the end of 2006, Nigeria has become the largest single beneficiary of debt relief to date, turning it into a very clear 'net creditor nation' almost overnight. Whether Nigeria can turn this lucky 'double fortune' into the single biggest bang-for-buck on the continent will depend on Nigerian politics and governance more than ever."
As part of Global Insight's Sovereign Risk Service, developments are continually monitored and updated analysis provided on nations affected by the enhanced HIPC Initiative, as well as other debt-relief operations.
About Global Insight's New Sovereign Risk Service
Global Insight's Sovereign Risk Service is the world's first truly global 202-country sovereign rating service. Each country is systematically examined across its economics, politics, and finances, with a short- and medium-term credit rating view. This rating service is uniquely integrated into Global Insight's macroeconomic forecasting process and its "Same-Day Analysis" event-driven and data surveillance and intelligence reporting service.
For more information, please visit: www.globalinsight.com/sovereignrisk.
Contact:
Jan Randolph, Head of Sovereign Risk, Global Insight, [Europe]
+44 (0)79-4198-3105 (jan.randolph@globalinsight.com)
Karanta Kalley, Managing Director Africa Group, Global Insight, [US]
+1 (610) 490-2738 (karanta.kalley@globalinsight.com)
Gavin Knight, Media Relations, Global Insight
+ 44(0)20-7452-5183 (gavin.knight@globalinsight.com)
About Global Insight
Global Insight, Inc. (http://www.globalinsight.com/) is a privately held company that brought together the two most respected economic information companies in the world, DRI and WEFA. Global Insight provides the most comprehensive economic and financial information available on countries, regions and industries, using a unique combination of expertise, models, data and software within a common analytical framework to support planning and decision-making. Through the world's first same-day analysis and risk assessment service, Global Insight provides immediate insightful analysis of market conditions and key events around the world, covering economic, political, and operational factors. The company has over 3,800 clients in industry, finance, and government with revenues in excess of $80 million, over 600 employees and 23 offices in 13 countries covering North and South America, Europe, Africa, the Middle East, and Asia.
Notes:
"G8 Debt Relief measures" refers to the comprehensive Multilateral Debt Relief Initiative (MDRI) proposed at the G8 Summit in July 2005. The Multilateral Debt Relief Initiative (MDRI) cancels 100% of the debt owed to the International Monetary Fund, the World Bank's International Development Association, and the African Development Fund for developing nations that have reached the "completion point" under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative and/or have a per capita income of less than US$380. To date, the MDRI has already granted 100% relief on debt owed by 18 developing nations and promises similar treatment for all countries reaching the completion point under the enhanced HIPC Initiative. As the three creditor institutions formally authorized the cancellation of debt for a nation, implementation will be from the current year forward.
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