African economies are at a pivotal juncture. The COVID-19 pandemic has brought economic activity to a standstill. Africa’s hard-won economic gains of the last two decades, critical in improving living standards, could be reversed.



High public debt levels and the uncertain outlook for international aid limit the scope for growth through large public investment programs. The private sector will have to play more of a role in economic development if countries are to enjoy a strong recovery and avoid economic stagnation. Heads of state from Africa made this one of their resounding messages during the recent summit on “Financing African Economies” held in Paris in May.&nbsp;



Infrastructure—both physical (roads, electricity) and social (health, education)—is one area where the private sector could be more involved. Africa’s infrastructure development needs are huge&#8211;in the order of 20 percent of GDP on average by the end of the decade. How can this be financed? All else equal, the main source of financing would be more tax revenue collections, something which most countries are working towards. But, given&nbsp;<a href="https://lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDQsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMTA2MTQuNDE4ODQ5OTEiLCJ1cmwiOiJodHRwczovL2Jsb2dzLmltZi5vcmcvMjAyMS8wNS8xMi90aGUtcG9saWN5bWFrZXJzLXRyaWxlbW1hLz91dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkifQ.nT2rxSqNlrTZtLzep3tW67rQaaLMFJCSd2CC6Zkv5fk/s/1121717145/br/107866138545-l" target="_blank" rel="noreferrer noopener">the scale of the needs</a>, new financing sources will have to be mobilized from the international community and the private sector.



Africa is a continent that holds immense opportunity for private investors. It has a young and growing population and abundant natural resources. Cities are seeing massive growth. Many countries have launched long-term industrialization and digitalization initiatives. But significant investment and innovation are necessary to unlock the region’s full potential.&nbsp;<a href="https://lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDUsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMTA2MTQuNDE4ODQ5OTEiLCJ1cmwiOiJodHRwczovL3d3dy5pbWYub3JnL2VuL1B1YmxpY2F0aW9ucy9EZXBhcnRtZW50YWwtUGFwZXJzLVBvbGljeS1QYXBlcnMvSXNzdWVzLzIwMjEvMDUvMTQvUHJpdmF0ZS1GaW5hbmNlLWZvci1EZXZlbG9wbWVudC01MDE1Nz91dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkifQ.cRnvsNqNSfgVyXK9W3qrH5VQnkAGEPgLw-hE3I07Pk0/s/1121717145/br/107866138545-l" target="_blank" rel="noreferrer noopener">Recent research published by IMF staff</a>&nbsp;shows that the private sector could, by the end of the decade, bring additional annual financing equivalent to 3 percent of sub-Saharan Africa’s GDP for physical and social infrastructure. This represents about $50 billion per year (using 2020 GDP) and almost a quarter of the average private investment ratio in the region (currently 13 percent of GDP).&nbsp;



What constrains private finance now?



At the moment, the private sector is not involved much in financing and delivering infrastructure in Africa, compared to other regions. Public entities, such as national governments and state-owned enterprises, carry out 95 percent of infrastructure projects. The volume of infrastructure projects with private sector participation has significantly declined in the past decade, following the commodity price bust. The limited role of private investors is also apparent from an international comparison perspective: Africa attracts only 2 percent of global flows of foreign direct investment. And when investment does go to Africa, it is predominantly to natural resources and extractive industries, not health, roads or water. 



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="799" height="800" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-1-june-14_original-799x800.png" alt="" class="wp-image-406818" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-1-june-14_original-799x800.png 799w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-1-june-14_original-300x300.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-1-june-14_original-80x80.png 80w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-1-june-14_original-768x769.png 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-1-june-14_original.png 1080w" sizes="auto, (max-width: 799px) 100vw, 799px" /></figure>



To attract private investors and transform the way Africa finances its development, improvements in the business environment seem critical. Our research shows that three key risks dominate international investors’ minds:



<ul class="wp-block-list"><li>Project risk.&nbsp;Despite Africa presenting a wealth of business opportunities, the pipeline of projects that are truly “investment-ready” remains limited. These are projects sufficiently developed to appeal to investors that do not want to invest in early-stage concepts or unfamiliar markets. Financial and technical support by donors and development banks can help countries fund feasibility studies, project design and other preparatory activities that expand the pool of bankable projects.</li><li>Currency risk. Imagine that a project yields a return of 10 percent a year, but the currency depreciates by 5 percent at the same time&#8211;this would eliminate half of the profits for foreign investors. No wonder currency risk is a top concern for them. Prudent macroeconomic policy combined with sound foreign exchange reserve management can greatly reduce currency volatility.</li><li>Exit risk. No investor will enter a country if they don’t have assurances that they can also exit by selling their stakes in a project and recouping their gains. Narrow and underdeveloped financial markets may prevent investors from exiting by issuing shares. Capital controls can slow down or increase the cost of exiting. And, when the legal framework is weak, investors may get bogged down in legal battles to have their rights recognized.</li></ul>



Incentivizing private investment



Improving the business climate is important but not enough. Development sectors have certain structural features that make private sector participation intrinsically complicated, even in the most favorable environments. For instance, infrastructure projects often have large upfront costs, but their returns accrue over long periods of time, which can be difficult for private investors to assess. Private sector growth also thrives on networks and value chains, which may not yet exist in new markets.



When these problems are acute, governments may have to provide extra incentives to make infrastructure projects attractive to private investors. These incentives, which comprise various types of subsidies and guarantees, can be costly and carry fiscal risks. But the truth is, many projects in development sectors won’t happen without them. In East Asia, 90 percent of infrastructure projects with private participation receive government support.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="799" height="800" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-2-june-14_original-799x800.png" alt="" class="wp-image-406819" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-2-june-14_original-799x800.png 799w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-2-june-14_original-300x300.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-2-june-14_original-80x80.png 80w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-2-june-14_original-768x769.png 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/chart-2-june-14_original.png 1080w" sizes="auto, (max-width: 799px) 100vw, 799px" /></figure>



With certain design features, governments can maximize the efficiency and impact of public incentives, while minimizing risks. Support should be targeted, temporary and granted on the basis of proven market dysfunctions. It should also be transparent, leave sufficient risk to private parties, and display additionality, meaning that incentives should make worthy projects happen that would not happen otherwise. Finally, their size should be well calibrated to avoid overcompensating the private sector.&nbsp;&nbsp;&nbsp;



Given the limited availability of public funds, African countries and development partners could consider reallocating some resources used for public investment towards financing public incentives for private projects. When this reallocation is gradual and supported by sound institutions, transparency and governance, it could increase the amount, range, and quality of services for people in Africa. More innovative thinking can help realize the transformative potential of infrastructure on the continent.

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How to Attract Private Finance to Africa’s Development

LONDON, June 14 (Reuters) &#8211; Top development banks from the world&#8217;s richest countries made a landmark joint pledge on Monday to pump $80 billion into African companies and projects over the next five years.



The International Monetary Fund has estimated sub-Saharan Africa will need an additional $425 billion between now and 2025 to fight COVID-19 and reduce poverty levels now being exacerbated by the pandemic.



The region is also being hit hard by climate change and Monday&#8217;s $80 billion pledge was the first time the Development Finance Institutions (DFI) from the United States, Europe and other Group of Seven wealthy nations have made a collective commitment to the African continent.



David Marchick, chief operating officer of the U.S. International Development Finance Corporation (DFC) said investing more in Africa was now &#8220;a top priority&#8221; under the Biden administration, while the head of the European Investment Bank, Werner Hoyer, which injected over 5 billion euros ($6 billion) into Africa last year, said it was ready to co-operate further with African and multilateral partners.



The step comes as Western nations fight to counter rapidly expanding Chinese and Russian economic and political influence in Africa with its fast-growing populations and vast mineral resources.



Monday&#8217;s pledge followed the G7&#8217;s weekend promise to provide 1 billion COVID-19 vaccine doses to poorer countries over the next year and news that they were also looking at reallocating another $100 billion from the IMF&#8217;s war chest to help with the economic fallout.



The World Health Organization (WHO) and global vaccine charities launched the COVAX programme last April to distribute COVID-19 vaccines to some of the world&#8217;s poorest people.



The scheme has faced setbacks though: production glitches, a lack of support from wealthy nations and a recent move by India, the biggest vaccine manufacturer, to curb its exports following its own massive spike in cases.



($1 = 0.8252 euros) 



(Reporting by Marc Jones; Editing by Andrea Ricci)

Top G7 development banks pledge $80 billion for African firms

TOKYO, June 14 (Reuters) &#8211; Global shares held near record highs on Monday while U.S. bond yields flirted with three-month lows as investors expect the Federal Reserve to stick to its dovish mantra later this week.



Japan&#8217;s Nikkei rose 0.7% while MSCI&#8217;s broadest index of Asia-Pacific shares outside Japan was down 0.2%. Activity was limited with the region&#8217;s largest markets &#8211; China, Hong Kong and Australia &#8211; closed for a holiday.



Globally, markets were basking in the prospect of a broadening economic recovery from the coronavirus pandemic and anticipation of continuity in dovish monetary policy from the U.S. Federal Reserve. Oil stood at multi-year highs.



The MSCI world equity index, the U.S. S&amp;P 500 and the pan-regional STOXX Europe 600 index all closed at record highs on Friday. EuroSTOXX 50 futures rose 0.2% on Monday. S&amp;P 500 futures nudged up 0.1%



The rally came even as U.S. inflation data on Thursday exceeded market expectations and amid surging factory prices in China &#8211; both of which investors appeared to regard as temporary or manageable.



&#8220;Strip used cars, hotels, and other leisure-related reopening plays out of the (U.S.) CPI, and I am not sure the inflation outlook is the end of days many are predicting,&#8221; said OANDA analyst Jeffrey Halley in a note on Monday.



&#8220;Yes, PPIs are racing higher, but will that be reflected in higher consumer goods prices from China? I am not so sure on past experience…the honest answer is that we just don&#8217;t know yet. Certainly, that&#8217;s what the U.S. bond market is saying to us.&#8221;



Ample funds are finding their way to bonds, where the yield on 10-year U.S. Treasuries stood at 1.4602% ahead of the Fed&#8217;s policy meeting this week, having fallen to a three-month low of 1.428% on Friday.



&#8220;It is becoming painful for bond bears and I bet the 10-year yield will fall to 1.25% or even 1%,&#8221; said Akira Takei, fund manager at Asset Management One, noting that the U.S. economic recovery is likely to slow in coming months.



Speculators are also building up long positions in U.S. debt, with their net long positions in U.S. bond futures hitting the highest level since October 2017, U.S. financial watchdog data showed.



Many investors expect the Fed to repeat its dovish view at its two-day meeting from Tuesday.



While some Fed board members have said the central bank should start discussing tapering its bond buying, most investors think a majority of policymakers still prefer to wait a bit more.



&#8220;There will probably be no surprise from the Fed this week,&#8221; said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. &#8220;But in the longer term, there&#8217;s clear risk of the Fed&#8217;s stimulus becoming excessive.&#8221;



In the currency market, the euro has lost steam after the European Central Bank last week showed no willingness to reduce its stimulus either.



The euro traded at $1.2099, having fallen to a one-month low of $1.2093 on Friday.



The yen stood little changed at 109.72 yen.



The British pound changed hands at $1.4108, near the lower end of its trading range over the past month, ahead of British Prime Minister Boris Johnson&#8217;s announcement on Monday on whether its planned lifting of coronavirus restrictions can go ahead as scheduled on June 21.



British tabloid The Sun on Friday reported Johnson is set to delay lockdown lifting to July 19.



Meantime, oil prices held at multi-year highs on an improved outlook for worldwide fuel demand. Brent crude futures inched up 0.5% to $73.07 per barrel, their highest since May 2019. U.S. crude futures added 0.5% to $71.32 per barrel, their highest since October 2018.



Bitcoin held on to gains won on the weekend when Elon Musk flagged Tesla&#8217;s possible resumption of transactions using the token. It last bought $39.267.



(Reporting by Hideyuki Sano in Tokyo. Additional reporting by Tom Westbrook in Singapore; Editing by Kenneth Maxwell and Jacqueline Wong)

World map with charts and graphs as symbols of global finance

Stocks wait at record peaks for Fed; oil marches higher

CARBIS BAY, England, June 13 (Reuters) &#8211; The Group of Seven nations on Sunday pledged to rapidly scale up technologies and policies that accelerate the transition away from unabated coal capacity, including ending new government support for coal power by the end of this year.



The countries, in a communique following their summit in Britain, confirmed pledges to increase climate finance contributions as part of efforts to reduce emissions that contribute to climate change and help a move toward cleaner energy, although climate groups said firm cash promises and other details were missing.



&#8220;Coal power generation is the single biggest cause of greenhouse gas emissions,&#8221; the seven nations &#8211; the United States, Britain, Canada, France, Germany, Italy and Japan &#8211; said, adding &#8220;continued global investment in unabated coal power generation is incompatible with keeping 1.5°C within reach.&#8221;



&#8220;We stress that international investments in unabated coal must stop now and we commit now to an end to new direct government support for unabated international thermal coal power generation by the end of 2021,&#8221; they said.



U.S. President Joe Biden, speaking after the summit, noted a commitment of up to $2 billion &#8220;to support developing countries as they transition away from unabated coal-fired power.&#8221;



The nations, in their statement, vowed to focus on other technologies, including carbon capture, to help speed up the transition away from coal.



&#8220;We will focus on accelerating progress on electrification and batteries, hydrogen, carbon capture, usage and storage, zero emission aviation and shipping, and for those countries that opt to use it, nuclear power,&#8221; the communique said. 



(Reporting by Elizabeth Piper and Susan Heavey; Editing by Michael Holden and Daniel Wallis)

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G7 agrees to end new gov’t support for coal power by end of 2021

&nbsp;South African President Cyril Ramaphosa has urged the Group of Seven countries to help finance the World Health Organization&#8217;s programme to boost COVID-19 testing, diagnostics and vaccines, the presidency said on Sunday.



Ramaphosa, who has joined a summit of the club of rich democracies in England and addressed them on Saturday, said the G7 countries, which together account for more than half of global output, should support the Access to COVID-19 Tools Accelerator to plug the $16.8 billion funding gap for this year.



&#8220;We need to address the substantial financing gap for tests, treatments, critical supplies like oxygen and the health systems that enable testing, treatment and vaccination,&#8221; Ramaphosa said in the presidency statement.



The World Health Organization’s ACT Accelerator programme for global COVID-19 treatments aims to fast-track production and ensure equitable access to tests, treatments, and vaccines in the fight against COVID-19.



&#8220;If all G7 countries met their fair share target, this initiative would be two-thirds funded – and it would be 90% funded if all G20 countries made their fair share contributions,&#8221; Ramaphosa said.



Ramaphosa also urged G7 members to support the TRIPS waiver on patents for COVID-19 vaccines and engage in negotiations that could help boost vaccine production.



Around 90% of African countries will miss a September target to vaccinate at least 10% of their populations against the virus as a third wave of the pandemic looms on the continent, the WHO has said.



Africa has now registered five million COVID-19 cases, with the southern Africa region the worst affected, a Reuters tally has shown.



&#8220;If the world is to emerge from this grave crisis, it is essential that we work together to mobilise and direct resources to those countries in the greatest need – and that we do so now,&#8221; said Ramaphosa.



The G7 groups the United States, Japan, Germany, Britain, France, Italy and Canada.



 (Reporting by Tanisha Heiberg Editing by Gareth Jones)

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S.Africa’s President Ramaphosa urges G7 nations to plug COVID-19 funding gap

CARBIS BAY, England, June 11 (Reuters) &#8211; The United States and other Group of Seven nations are considering reallocating $100 billion from the International Monetary Fund&#8217;s warchest to help countries struggling most to cope with the COVID-19 crisis, the White House said.



The issue will be on the table when G7 leaders discuss how to help steer the world&#8217;s recovery from the coronavirus pandemic at a three-day summit in Cornwall, in southwestern England, which begins on Friday.



&#8220;The United States and our G7 partners are actively considering a global effort to multiply the impact of the proposed Special Drawing Rights (SDR) allocation to the countries most in need,&#8221; the U.S. president&#8217;s office said.



&#8220;At potentially up to $100 billion in size, the proposed effort would further support health needs – including vaccinations – and help enable greener, more robust economic recoveries in vulnerable countries, and promote a more balanced, sustained, and inclusive global recovery.&#8221;



French President Emmanuel Macron on Thursday called on the other G7 nations to find an agreement on reallocating $100 billion in SDRs to African states.



World finance chiefs agreed in April to boost SDRs by $650 billion and extend a debt-servicing freeze to help developing countries deal with the pandemic, although only $34 billion was to be allocated to Africa.



(Writing by William Schomberg; Editing by Kate Holton)

G7 eyes allocating $100 bln from IMF funds to COVID-ravaged nations-US

LONDON/SHANGHAI, June 11 (Reuters) &#8211; Shares gained on Friday and bond yields fell from the United States to Europe as investors shrugged off rising U.S. consumer prices, even as fears of longer-term inflation lingered.



The Euro STOXX 600 added 0.3% to hit a record high and was on course for a sixth straight day of gains. London shares gained 0.6%, helped by a 1% gain for the mining sector, while Paris climbed 0.4%.



Also boosting sentiment in Europe was the European Central Bank on Thursday raising its growth and inflation projections, while pledging a steady flow of stimulus for now.



The MSCI world equity index, which tracks shares in 49 countries, gained 0.1%. Wall Street futures were flat.



The U.S. consumer price index posted on Thursday its biggest year-on-year gain since August 2008 of 5%, following a 4.2% rise in April. Hefty contributions from short-term rises in airline ticket prices and used cars, raised doubts about underlying inflationary pressures.



The rise in the U.S. consumer price index reflected short-term adjustments related to the reopening of the economy, some economists say. As such, many investors are confident the Federal Reserve is deftly handling a rebound in economic growth &#8211; though its definition of &#8220;transitory&#8221; remains unclear.



At the same time, U.S. Labor Department data showed the lowest level of new claims for unemployment benefits in nearly 15 months last week.



U.S. stocks rallied to record highs on the data, with 10-year U.S. Treasury yields also dipping to a three-month low.



Market players said inflation worries have faded in the last month &#8211; even if the spectre of great pressure over the long run remains.



&#8220;Peak inflation concern was almost a month ago before the higher prints came in,&#8221; said Kiran Ganesh, head of multi asset at UBS Global Wealth Management in London. &#8220;Markets seem to be taking the Fed at its word but when we talk to clients there is concern about long-term inflation.&#8221;



Euro area bond yields followed suit on Friday, with German 10-year yields set for their biggest fall this year. Yields move inversely with prices.



MSCI&#8217;s broadest index of Asia-Pacific shares outside Japan was last up 0.4%.



FLATTENING CURVE



Falling expectations that higher inflation could lead to early Fed tightening prompted a flattening of the U.S. yield curve, with the spread between the 10-year and 2-year yield at its narrowest since late February on Friday.



10-year Treasury yields were last at 1.4418%, on course for the steepest weekly drop in a year. The 30-year yield touched 2.1270%, the lowest since Feb. 26.



Investors said that yields would likely move higher again as economies reopen from coronavirus lockdowns.



&#8220;We still think consumers are going to help prices higher, when these economies reopen properly, that people can start travelling again, spending again,&#8221; said Jeremy Gatto, portfolio manager at Unigestion.



&#8220;We are going to get a further boost from the consumption side, and we therefore expect bond yields moving higher.&#8221;



The U.S. dollar fell as yields dipped. Against a basket of currencies it fell slightly to 90.045, hemmed into the relatively tight trading range of this week and down very slightly for the week.



The ECB&#8217;s dovish commitment to stick with its elevated tempo of bond buying held the euro in check at $1.2185.



(Reporting by Tom Wilson in London and Andrew Galbraith in Shanghai; additional reporting by Sujata Rao Editing by Shri Navaratnam, Kim Coghill and Elaine Hardcastle)

European shares hit record high, bond yields fall as inflation fears ease

Tanzania has asked the International Monetary Fund for a $571 million loan to help it tackle the challenges caused by the COVID-19 pandemic, its finance minister said on Thursday as he raised spending in the budget for the next financial year.



Tanzania, which under late President John Magufuli had denied the existence of COVID-19 last year, has started acknowledging the crisis and its impact, after President Samia Suluhu Hassan took over in March.



&#8220;This is a low interest-rate loan to tackle the social and economic impact of COVID-19,&#8221; Finance Minister Mwigulu Nchemba told parliament while presenting the government&#8217;s budget for the 2021/22 (July-June) fiscal year.



IMF officials in Dar es Salaam and Washington confirmed the talks, adding that the government, which has not published data on coronavirus infections since May last year, will be required to provide that information.



&#8220;When applying for pandemic-related emergency financing, evidence of the pandemic has to be available to substantiate the claim,&#8221; the IMF&#8217;s resident representative, Jens Reinke, told Reuters.



&#8220;Let&#8217;s wait for the government&#8217;s announcement, which will come soon, after the COVID-19 special committee formed by the president issued its recommendations,&#8221; said government spokesman Gerson Msigwa. &#8220;It will have answers on all those areas.&#8221;



Hassan has charted a change of course in tackling the coronavirus from Magufuli, who underplayed the pandemic and expressed scepticism about COVID-19 vaccines.



The government plans to spend 36.33 trillion shillings ($15.71 billion) in the fiscal year starting next month, Nchemba said in the budget statement, a 4% increase from the current financial year.



It will be funded by a mix of local revenue and borrowing, he said, adding that the economy is likely to grow faster this year, after growth was curbed by the pandemic last year.



Nchemba said during the budget speech that Tanzania&#8217;s economy was projected to grow by 5.6% in calendar 2021 &#8211; up from last year&#8217;s growth of 4.8% &#8211; and 6.2% in 2023. He did not give a projection for 2022.



Tanzania plans to seek a sovereign credit rating to give it access to international capital markets, the minister said. ($1 = 2,313.0000 Tanzanian shillings)



 (Reporting by Omar Mohammed in Nairobi and Nuzulack Dausen in Dar es Salaam; Writing by Omar Mohammed; Editing by Alexandra Hudson and Peter Cooney)

Tanzania turns to IMF loan, boosts government spending by 4%

Gabon is targeting a return to economic growth of 1.5% in 2021, according to a budget adopted by the government on Thursday, after a 1.8% contraction in 2020 due to the coronavirus pandemic and a fall in oil prices.



The Central African oil producer had been recovering from a 2014 slump in oil prices when the COVID-19 crisis and a fresh collapse in crude prices struck, increasing unemployment and widening the deficit.



The government&#8217;s economic forecast is roughly in line with that of the International Monetary Fund, which sees Gabon posting growth of 1.2% this year.e



 (Reporting by Gerauds Wilfried Obangome Writing by Alessandra Prentice Editing by Jonathan Oatis)

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Gabon budget projects return to growth of 1.5% this year

PARIS, June 10 (Reuters) &#8211; Food imports costs across the world are expected to surge to record levels this year, piling pressure on many of the poorest countries whose economies have already been ravaged by the COVID-19 pandemic, the U.N. Food Agency said on Thursday.



These high costs may persist for a sustained period as nearly all agricultural commodities have become more expensive, while a rally in energy markets could raise farmers&#8217; production costs, the Food and Agriculture Organization (FAO) said.



&#8220;The problem is not the world facing higher prices,&#8221; Josef Schmidhuber, deputy director of the FAO&#8217;s trade and markets division, told Reuters.



&#8220;The issue is vulnerable countries.&#8221;



The world&#8217;s food import bill, including shipping costs, is projected to reach $1.715 trillion this year, up 12% from $1.530 trillion in 2020, the FAO said in its twice-yearly Food Outlook report on Thursday.



While growth in agricultural trade during the pandemic has shown the resilience of international markets, price rises since late 2020 are raising risks for some import-dependent states, it added.



Nations classed as Low-Income Food-Deficit Countries by the FAO are forecast to see food import costs jump 20% this year, with tourism-reliant economies in a particularly precarious position, the agency said.



International aid organisations have already warned of rising numbers of malnourished people in the world as the pandemic has compounded food insecurity linked to conflict and poverty in states like Yemen and Nigeria.



The FAO&#8217;s monthly food price index hit a 10-year high in May, reflecting sharp rises for cereals, vegetable oils and sugar.



A separate index of food import costs, including freight costs that have also soared, reached a record in March this year, surpassing levels seen during previous food price spikes in 2006-2008 and 2010-2012, the FAO said.



Inflationary pressures have led countries like Argentina and Russia to impose export curbs.



CHINESE MAIZE TRADE



The FAO does not issue forecasts for its price index, but its import cost projection for 2021 assumed prices would stay high, Schmidhuber said.



&#8220;Eventually agriculture will come back to a normal situation but it will take some time,&#8221; he said.



A strong volume increase for staple food imports last year had already driven up global import costs by 3%, to a record high.



Exceptions were beverages and fish products, which are more sensitive to economic conditions and were hit by supply-chain difficulties, the FAO said.



China&#8217;s imports have been a driver of agricultural demand and prices in the past year, partly reflecting Beijing&#8217;s efforts to rebuild its pig industry after a disease outbreak.



Chinese maize (corn) imports in the upcoming 2021/22 season are set to rise to 24 million tonnes, the FAO forecast. This would mean China, expected to quadruple its maize imports to 22 million tonnes in 2020/21, would remain the world&#8217;s top importer of the cereal.



A recovery in Chinese pork output is expected to reduce global trade, offsetting growth in beef and poultry flows to leave overall meat trade stable this year, the FAO added.



(Reporting by Gus Trompiz; Editing by Alexander Smith and Pravin Char)

Healthy groceries

Surging food import costs threaten world’s poorest, FAO warns

LONDON/SYDNEY, June 10 (Reuters) &#8211; Global shares hovered near a record high and the dollar also held steady on Thursday, eyeing U.S. inflation data for any sign the Federal Reserve could start tapering its massive stimulus.



Risk assets have remained buoyant in recent weeks as central bankers on both sides of the Atlantic signal their willingness to keep the monetary taps on until the post-pandemic recovery takes hold, believing inflationary pressures to be short-lived.



Yet April&#8217;s surprisingly strong U.S. inflation print spooked some, leading to a cautious run into the May numbers later on Thursday in case of another upside surprise.



Lagging in the pace of its recovery from COVID-19, the European Union&#8217;s central bank is set to keep rates unchanged when it meets later in the session, despite the most recent inflation print passing the target of just under 2%.



Ahead of both key events, market sentiment remained subdued with MSCI&#8217;s broadest gauge of global stocks flat at 715.79 points, just off a record high of 718.19 hit last week.



In early European trades, the pan-regional STOXX Europe 600 index was down 0.1% following gains overnight in Asia, where MSCI&#8217;s broadest index of Asia-Pacific shares outside Japan rose 0.5%.



U.S. stock futures pointed to a mixed open on Wall Street, with the S&amp;P called flat and Nasdaq down 0.2%.



Ankit Gheedia, BNP Paribas’ head of equity and derivative strategy for Europe, said he expected inflation to pick up &#8220;sharply&#8221; in the coming months.



&#8220;Some of the supply chain constraints point to more long lasting pain. So we think there will be higher inflation during summer,&#8221; although stock volatility would likely remain low in the coming days, absent a shock on inflation.



Overnight, fixed income markets were the big movers, with some analysts pointing to a setback to more U.S. stimulus efforts, while others suggested a likely clearing out of short positions in U.S. government bonds ahead of the May CPI.



Short positions in Treasuries were the highest since 2018, according to JP Morgan positioning data last week.



The yield on benchmark 10-year U.S. Treasury notes edged higher and was last at 1.4992%, albeit some way off the June high of 1.6270%.



Euro zone debt yields, meanwhile, were trading near their lowest levels since April, with Germany&#8217;s 10-year debt yield at -0.246%.



Ahead of the U.S. CPI data, analysts polled by Reuters said they expected a rise of 0.4% in May, taking the annual pace to 3.4%.



&#8220;I doubt the Fed will be spooked and I doubt markets will be unless we get the core well above 3.5%. And the less bonds get scared, the greater the chance that risk sentiment is supported and dollar weakness resumes,&#8221; Societe Generale analyst Kit Juckes said in a note.



Activity was muted in the currency market with the dollar flat against a basket of major currencies, with the euro down 0.1% and the pound down 0.2%



The CPI number is also likely to be key for gold as a higher print and the subsequent tapering fears could reduce demand. The yellow metal last traded down 0.3% at $1,882.1 an ounce.



Elsewhere, oil prices recovered from early weakness after a gasoline inventory surge in the United States, with Brent crude futures up 0.1% at $72.30 a barrel and U.S. crude futures flat at $69.98 a barrel.



(Additonal reporting by Swati Pandey in Sydney and Thyagu Adinarayan in London; Editing by Ana Nicolaci da Costa, Christopher Cushing and Angus MacSwan)

asian stock market

World shares, dollar hit pause ahead of U.S. CPI, ECB meeting

PARIS, June 10 (Reuters) &#8211; Global food import costs are expected to rise 12% in 2021 to a record due to surging commodity prices and robust demand during the COVID-19 crisis, the United Nations food agency said.



The world&#8217;s food import bill, including shipping costs, is projected to reach $1.715 trillion this year, from $1.530 trillion in 2020, the Food and Agriculture Organization (FAO) said in its twice-yearly Food Outlook report on Thursday.



Growth in agricultural trade during the pandemic showed the inelastic nature of food consumption and the resilience of international markets, but price rises since late 2020 were raising risks for poorer import-reliant countries, the FAO said.



Its monthly food price index hit a 10-year high in May, reflecting sharp gains for cereals, vegetable oils and sugar.



The FAO said a separate index of food import values, including freight costs that have also soared, reached a record in March this year, surpassing levels seen during previous food price spikes in 2006-2008 and 2010-2012.



A strong volume increase for staple food imports last year had already driven up global import costs 3% to a record.



Exceptions were beverages and fish products that are more sensitive to economic conditions and which saw demand curbed by supply chain difficulties, the FAO said.



China&#8217;s imports have been a driver of agricultural demand and prices in the past year, partly reflecting Beijing&#8217;s efforts to rebuild its pig industry after a disease outbreak.



Chinese maize (corn) imports in the upcoming 2021/22 season were expected to rise to 24 million tonnes, keeping China as the world&#8217;s top importer after its maize imports are expected to quadruple to 22 million tonnes in 2020/21, the FAO forecast.



A recovery in Chinese pork output was expected to reduce global trade, offsetting growth in beef and poultry flows to leave overall meat trade stable this year, the FAO said. 



(Reporting by Gus Trompiz; Editing by Alexander Smith)

the-food market-3147758_1920

Global food import costs to surge 12% to record this year -FAO

JOHANNESBURG, June 10 (Reuters) &#8211; The International Monetary Fund&#8217;s executive board has approved a disbursement to Angola of about $772 million after completing a fifth review of the African oil exporter&#8217;s loan program.



In a statement late on Wednesday, the Fund said even though the effects of the COVID-19 pandemic was still being felt in the Angolan economy, authorities have supported the recovery through sound policies.



&#8220;The authorities are continuing to strengthen public finances and debt dynamics. They achieved a strong fiscal adjustment in 2020 and are on track to do the same in 2021,&#8221; IMF Deputy Managing Director Antoinette Sayeh said in a statement.



&#8220;By saving the bulk of oil revenue windfall this year, they are helping to sustain the planned rapid reduction in public debt vulnerabilities. Their decision to request an extension of debt service relief under the Debt Service Suspension Initiative (DSSI) through end-December 2021 is welcome.&#8221;



The IMF said the new disbursement, under the Extended Fund Facility program that was initially approved in December 2018, brings total disbursements under the arrangement to about $3.9 billion.



&#8220;Strong non-oil growth recovery is critical for sustainability. The authorities need to maintain momentum on structural reforms that support stronger diversified growth, enhance governance, and combat corruption,&#8221; added Sayeh. 



(Reporting by Olivia Kumwenda-Mtambo; Editing by Muralikumar Anantharaman)

IMF says board approves $772 mln disbursement to Angola

Sudan and Egypt agreed on Wednesday to coordinate efforts to push Ethiopia to negotiate &#8220;seriously&#8221; on an agreement on filling and operating a giant dam it is building on the Blue Nile, a joint statement said.



The two countries, which are downstream from the dam, issued the statement after African Union-sponsored talks remained deadlocked.



Ethiopia is pinning its hopes of economic development and power generation on the Grand Ethiopian Renaissance Dam (GERD). Egypt fears the dam will imperil its water supply and Sudan is concerned about the impact on its own water flows.



Talks overseen by the AU, aimed at reaching a binding agreement, have repeatedly stalled.



At talks in Khartoum, the Sudanese and Egyptian foreign and irrigation ministers agreed on &#8220;coordinating the efforts of the two countries at the regional, continental and international levels to push Ethiopia to negotiate seriously&#8221;, the joint statement said.



Both countries blamed the failure of AU-sponsored talks on what they described as Ethiopia&#8217;s intransigence.



Ethiopia has said it plans to complete the second phase of filling the dam in the coming rainy season, a move Sudan and Egypt rejected before a binding legal agreement was reached.



Egypt and Sudan called on the international community to intervene &#8220;to ward off risks related to Ethiopia’s continued pursuit of its policy of seeking to impose a fait accompli on the downstream countries&#8221;.



There was no immediate response from Ethiopia, which has rejected calls from Egypt and Sudan to involve mediators outside the African Union.



Sudan said Ethiopia began the second phase of filling the reservoir behind GERD in early May.



(Reporting by Khalid Abdelaziz and Ahmed Tolba; writing by Mahmoud Mourad; editing by Timothy Heritage)

blue nile

Egypt and Sudan urge Ethiopia to negotiate seriously over giant dam

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While the U.S. Federal Reserve is publicly committed to keeping interest rates near zero for some time, there are growing expectations that accelerating inflation could pressure the central bank to begin seriously debating the withdrawal of monetary stimulus.



At the same time, central banks in other parts of the world are already adjusting monetary settings or preparing to dial back pandemic crisis-mode stimulus measures.



JAPAN



The Bank of Japan has maintained ultra-easy monetary policy for years in a long battle to revive stagnant consumer prices.



A Fed tapering is unlikely to change that outlook. The key concern among BOJ policymakers is the risk of market turbulence that could boost investors&#8217; demand for the safe-haven yen.



CANADA



The Bank of Canada became the first among Group of Seven nations to withdraw its pandemic era stimulus and signalled rates could begin to rise in 2022.



CHINA



China&#8217;s central bank is trying to cool credit growth to help contain debt risks, but is treading warily to avoid hurting the economic recovery that remains uneven as consumption lags.



A Chinese central bank official said signals from the Fed on future policy shifts will have limited impact on China&#8217;s financial markets.



NORWAY



The Norwegian central bank plans to raise rates in the third or fourth quarter of 2021, likely making it the first among its G10 peers to increase the cost of borrowing since the pandemic began.



SWEDEN



Sweden&#8217;s central bank has said it intends to complete its 700-billion Swedish crown asset purchase programme as planned by the end of 2021.



But the pace of asset purchases will decrease throughout the year. After that, the Riksbank has said it will keep its balance sheet roughly unchanged, at least during 2021, replacing bonds that mature.



NEW ZEALAND



The Reserve Bank of New Zealand has held rates at record lows but hinted at a hike as early as September next year as the country rapidly emerges from its pandemic slump.



SOUTH KOREA



The Bank of Korea signaled an eventual tilt towards tightening to end its run of record-low rates, and upgraded its growth and inflation projections.



TURKEY



Double-digit inflation, persistent currency weakness and badly depleted reserves prompted Turkey&#8217;s central bank to begin aggressively tightening policy in September last year, well before emerging market peers. Its key rate is now one of the highest globally at 19%.



The World Bank and others say premature Fed tightening is the biggest risk for Turkey. The central bank is not expected to tighten any more in part due to public pressure from President Tayyip Erdogan to maintain monetary stimulus.



BRAZIL



Brazil&#8217;s central bank raised its benchmark rate at its past two policy meetings and has indicated it will do so again with inflation expected to surge.



SOUTH AFRICA



South Africa&#8217;s central bank has kept rates low to support its economic recovery, but said upside inflation risks were beginning to emerge.



Its governor said the recent spike in consumer prices was temporary, but that the bank would not hesitate to tighten policy if it became permanent.



INDONESIA



Indonesia&#8217;s central bank governor said in May it must be prepared for a potential Fed tightening next year, warning that such a move could have an impact on local financial markets.



Bank Indonesia has cut rates by a total of 150 basis points and injected more than $50 billion in liquidity since the pandemic began.



PHILIPPINES



Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno has said the central bank is prepared for any change in Fed policy but does not think the U.S. bank will &#8220;rock the boat&#8221; ahead of U.S. mid-term elections next year.



The BSP kept rates at record lows and pledged to maintain loose policy until it was sure the economy was on a path to recovery.



INDIA



The Reserve Bank of India (RBI) has kept rates at record lows as its economy struggles with a devastating new wave of COVID-19 infections.



RBI Governor Shaktikanta Das said its growing foreign exchange reserves, which now exceed $600 billion, will help deal with &#8220;challenges arising out of global spillovers.&#8221; 



(Reporting by Swati Bhat in Mumbai, Neil Jerome Morales in Manila, Gayatri Suroyo in Jakarta, Jamie McGeever in Brasilia, Praveen Menon in Wellington, Leika Kihara in Tokyo, Cynthia Kim in Seoul, Jonathan Spicer in Istanbul, Mfuneko Toyana in Johannesburg; Editing by Kim Coghill)

phillip

How global central banks are leaning as Fed taper talk grows

Nigeria plans to borrow 722.53 billion naira ($1.76 billion) from domestic capital markets for additional security spending, Finance Minister Zainab Ahmed said on Wednesday.



As part of Nigeria&#8217;s security spending, the World Bank also agreed to allow the government to restructure existing loans of 39.58 billion naira to supplement the funds, she told reporters after a cabinet meeting.



The cabinet also approved an allocation of 83.56 billion naira for the purchase and deployment of 30 million doses of the Johnson &amp; Johnson COVID-19 vaccine.



Nigeria hopes to receive 70 million doses of the Johnson &amp; Johnson shots from the African Union, but purchasing the doses required a supplementary budget, as no provision was made for vaccinations in the 2021 finance bill adopted in December. ($1 = 410.0400 naira)



 (Reporting By Felix Onuah, writing by Libby George Editing by Gareth Jones and Cynthia Osterman)

nigeria

Nigeria to borrow $1.76 bln for security spending –FinMin

BEIJING, June 9 (Reuters) &#8211; China&#8217;s factory gate prices rose at their fastest annual pace in over 12 years in May, driven by surging commodity prices, highlighting global inflation pressures at a time when policymakers are trying to revitalise COVID-hit growth.



Investors are increasingly worried that pandemic-driven stimulus measures could supercharge global inflation and force central banks to tighten policy, potentially curbing the recovery.



China&#8217;s producer price index (PPI) increased 9.0%, the National Bureau of Statistics (NBS) said in a statement, as prices bounced back from last year&#8217;s pandemic lows.



The PPI rise &#8211; the fastest monthly gain since September 2008 &#8211; was driven by significant price increases in crude oil, iron ore and non-ferrous metals, the NBS said.



Analysts in a Reuters poll had expected the PPI to rise 8.5% after a 6.8% increase in April.



The surge in PPI has yet to feed through to China&#8217;s consumer inflation, meaning the People&#8217;s Bank of China is unlikely to worry for now.



But there are some signs Chinese factories, with already tight profit margins, are passing on higher raw material and component costs to overseas clients, which could reinforce the global inflation loop.



&#8220;The worry is PPI may hover at an elevated level for an extended period of time, which would create economic headaches if mid- or downstream firms fail to absorb higher costs,&#8221; said Nie Wen, chief economist at Hwabao Trust.



Consumer prices saw their biggest year-on-year increase in eight months but came in below expectations and remained well below the government&#8217;s official target of around 3%.



&#8220;Producer price inflation is probably close to a peak…we don&#8217;t expect (consumer price inflation) to rise much above 2% in the coming quarters. As such, (the data) is unlikely to trigger any shift in monetary policy,&#8221; said Julian Evans-Pritchard, senior China economist at Capital Economics.



The release comes as U.S. inflation data on Thursday is being closely watched by investors, who worry another high reading might put pressure on the Federal Reserve to start thinking about tapering its stimulus.



Chinese coal and resource shares rose after the NBS&#8217;s producer price inflation data, driving the broader stock market higher .



COMMODITY PRICES



On a monthly basis, the PPI rose 1.6%, up from a 0.9% uptick in April.



Coal-fired power plants also stocked up on thermal coal to meet surging electricity demand during the summer peak, resulting in a 10.6% month-on-month increase in prices in the coal mining and washing sector, up from 2.8% the previous month, said Dong Lijuan, senior statistician at the NBS.



Prices for commodities including coal, steel, iron ore and copper, which affect the PPI, have surged this year, fuelled by post-lockdown recoveries in demand and ample global liquidity.



Higher commodity prices and low bases last year could further drive up China&#8217;s producer price inflation in the second and third quarters, China&#8217;s central bank has said.



Chinese policymakers have pledged to take measures to cool red hot commodity prices and prevent them being passed on to consumers, while the state planner has said China will strengthen price controls of iron ore, copper, corn and other commodities.



NBS data also showed China&#8217;s consumer price index (CPI) rose 1.3% in May in annual terms, up from a 0.9% gain in April but lower than the 1.6% forecast in the Reuters poll.



Food inflation rose 0.3% in May from a year earlier on higher prices for freshwater fish and eggs, despite still falling pork prices. That compared with a 0.7% drop in food prices in April.



Non-food prices, including airfares, gasoline and diesel prices, accelerated to 5.5%, likely bolstered by China&#8217;s Labour Day Holiday at the start of May.



On a monthly basis, rising factory input costs have started to be passed onto consumers in the sales of fridges, televisions, laptops, construction materials and summer clothes, but their price gains remained mild, NBS&#8217;s Dong said.



China&#8217;s economy has seen a strong rebound from a coronavirus-induced slump early last year, growing a record 18.3% in the first quarter.



(Reporting by Liangping Gao, Stella Qiu and Ryan Woo; Editing by Ana Nicolaci da Costa)

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European shares hit record high, bond yields fall as inflation fears ease

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Surging food import costs threaten world’s poorest, FAO warns

World shares, dollar hit pause ahead of U.S. CPI, ECB meeting

Global food import costs to surge 12% to record this year -FAO

IMF says board approves $772 mln disbursement to Angola

Egypt and Sudan urge Ethiopia to negotiate seriously over giant dam

How global central banks are leaning as Fed taper talk grows

Nigeria to borrow $1.76 bln for security spending –FinMin

China’s highest producer inflation in over 12 years highlights global price pressures

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Economy

How to Attract Private Finance to Africa’s Development

Top G7 development banks pledge $80 billion for African firms

Stocks wait at record peaks for Fed; oil marches higher

G7 agrees to end new gov’t support for coal power by end of 2021

S.Africa’s President Ramaphosa urges G7 nations to plug COVID-19 funding gap

G7 eyes allocating $100 bln from IMF funds to COVID-ravaged nations-US

European shares hit record high, bond yields fall as inflation fears ease

Tanzania turns to IMF loan, boosts government spending by 4%

Gabon budget projects return to growth of 1.5% this year

Surging food import costs threaten world’s poorest, FAO warns

World shares, dollar hit pause ahead of U.S. CPI, ECB meeting

Global food import costs to surge 12% to record this year -FAO

IMF says board approves $772 mln disbursement to Angola

Egypt and Sudan urge Ethiopia to negotiate seriously over giant dam

How global central banks are leaning as Fed taper talk grows

Nigeria to borrow $1.76 bln for security spending –FinMin

China’s highest producer inflation in over 12 years highlights global price pressures

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