Sunday, June 21, 2009

More African nations seeking bailouts

June 11, 2009 - By Ed Cropley, BUSINESS REPORT by Reuters

More countries were asking for emergency financial support from the African Development Bank (AfDB), which had just lent Botswana $1.5 billion (R12bn) to plug a large budget deficit, AfDB president Donald Kaberuka said yesterday.

"There are other countries coming along and I hope we are able to respond," Kaberuka said.

He did not name them, but said the AfDB was concerned about countries that were heavily dependent on one or two mineral commodities, such as Botswana; those emerging from conflict; and states hit hard by last year's sudden exodus of foreign capital.

"We are trying to have tailor-made solutions for each one, depending on the structure of the economy and type of challenges they are facing," he said.

The AfDB seeks to reduce poverty and mobilise resources for Africa's economic and social development. It borrows from capital markets to provide loans to its regional members.

The downturn has hit Botswana hard, slashing prices and demand for diamonds, on which the southern African nation depends for a large chunk of its budget revenue.

Its budget shortfall has been estimated at 13.5 percent of gross domestic product. Ratings agencies have warned that the economy faces deep contraction over the next two years.

The budget support loan is the largest facility of its kind granted by the AfDB and the first such borrowing in 17 years by Botswana, which has a reputation as one Africa's best-run economies.

"The loan is large," Kaberuka admitted, "but the problem Botswana is facing is extremely unique."