Aurelia Butler

The head of the IMF’s Africa department has called for a significant increase in international support to help countries overcome a funding squeeze that is jeopardising the continent’s economic development.Abebe Selassie told the Financial Times that reform of the current mechanisms for dealing with unsustainable debts of African countries was “desperately needed”.“Do we have the authorising environment right now, a Gleneagles-like moment? We don’t, but it is that kind of moment that is needed,” he said, referring to the G8 summit in Scotland in 2005 that led to the cancellation of $130bn of debt for dozens of poor countries. Selassie did not call for an outright cancellation of current repayments. “We need a much more efficient sovereign debt framework,” he said. “We need to be sure that resources are going to support countries rather than being used to service unsustainable debts.”Zambia defaulted on its external debts in 2020 and is still struggling to reach a restructuring agreement with its creditors. Last December, Ghana defaulted on its foreign debts and restructured its domestic debts.Zambia has an IMF bailout programme but Selassie said the fund had been unable to conduct its second review because the country’s bilateral creditors, including China, had failed to reach agreement. Ghana, he said, “can’t even get to the first step [of an IMF programme] because it needs financing assurances from its creditors”. Several other African countries such as Egypt and Tunisia are at risk of default. Many have been shut out of international debt markets since 2020 by “exorbitant” borrowing costs, Selassie said, while finance from China and other new sources of lending had been curtailed, along with development assistance from rich countries.Yields demanded by investors to buy foreign currency bonds issued by governments in sub-Saharan Africa have soared to more than 10 percentage points above those on US Treasury bonds for much of the past year, a gap typically regarded as a sign of severe distress.“Very, very important long-term investments in health, education and infrastructure will have to be delayed [as a result],” he said.Several African leaders have called for a radical increase in support from the international community through the IMF and multilateral development banks including the World Bank.Ken Ofori-Atta, Ghana’s finance minister, recently called for a “recalibration” of funding resources for the region. He told the FT this month that the World Bank’s approximately $70bn in lending capacity for Africa was “clearly inadequate” and should be tripled to more than $200bn.He also called for a new issue of the IMF’s special drawing rights that would be allocated for African countries. SDRs are a form of reserve asset of which $650bn’s worth were distributed to the fund’s member countries at the height of the pandemic in August 2021.Selassie said it was “quite appropriate that ministers are pushing and asking these kinds of questions, and I really hope the international community listens”.In a report published on Friday, the IMF said growth rates in sub-Saharan Africa would decline for the second year in a row, weighed down by a contraction in growth in key economies such as South Africa.Growth across the region would hit 3.6 per cent this year, from 3.9 per cent last year, following a rebound to 4.8 per cent in 2021 after pandemic lockdowns were lifted, it said. More

BT held “war games” to prepare for the disruption from a potential conflict between China and Taiwan, in a sign of companies’ growing unease over escalating tensions in the region.Staff at the telecoms group’s Dublin-based procurement business took part in the two-day exercise last year, during which they modelled how they would secure BT’s supply chain against the fallout of a military clash, according to two people familiar with the matter.The simulation was held after the then US House Speaker Nancy Pelosi visited Taiwan in August, prompting China to stage unprecedented military drills around the island. The BT exercise involved a scenario where Beijing sank a ship near Taiwan, a key supplier of semiconductors to the telecoms industry, one of the people said.Beijing’s threats towards Taiwan have prompted concerns about a rupture to the global supply chain that for years has relied on smooth global trade.Taiwanese chipmakers, which produce semiconductors for Apple, Google and other tech groups, are responsible for more than 60 per cent of the world’s contract chipmaking capacity, while they dominate cutting-edge semiconductor production, according to a US government paper. After the scramble for various commodities, parts and products caused by the Covid-19 pandemic and last year’s Russian invasion of Ukraine, more companies are trying to ensure they are prepared for deepening geopolitical ructions. In Germany, business lobbies have voiced concerns about the secondary impacts of global sanctions on Beijing in the event of a war over Taiwan.Johan Gott, co-founder of US political risk consultancy Prism, which assisted with BT’s crisis simulation, said supply chains were “suddenly on the front lines of geopolitical [tensions]”. Although such simulations have mainly been practised by government and defence officials, the consultancy has run contingency exercises for an increasing number of corporate clients.China’s stance on Taiwan is unnerving business and political leaders. It recently launched more military exercises after Taiwan’s President Tsai Ing-wen met current US Speaker Kevin McCarthy in California. Last week, European leaders warned President Xi against a military escalation over Taiwan. Xi has stuck to the longstanding Communist Party position that it reserved the right to use force over Taiwan, which it considered to be part of its territory. The electronics, cars and telecoms industries are all expected to be severely affected in the event of a disruption to Taiwan’s chip supply chain, with the Semiconductor Industry Association in the US estimating lost revenues at $500bn for electronics manufacturers that depend on this supply alone.

But with semiconductors powering virtually every aspect of modern day life, the impact of a Taiwan conflict would inevitably stretch far beyond sectors that procure semiconductors from the island, said executives.Rhodium Group, an economics and policy research firm, said that the global disruption from a Taiwan conflict “would put well over $2tn in economic activity at risk, even before factoring in the impact from international sanctions or a military response”.Gott said simulations are delivered through a series of fictional news flashes, such as during a video call. This puts “stress on participants” forcing them to “make decisions under time pressure”, he said.Paul Kenealy, co-founder of cyber security consultancy Darkbeam, which also assisted BT by simulating incidents that would affect its operations, said the telecoms group was seeking to keep “the UK’s critical national infrastructure working”. Both Cott and Kenealy declined to comment on specific events that they helped simulate for BT.BT said that “like many businesses, we regularly run simulations to stress test our business on a range of scenarios as part of our risk management and planning”. Additional reporting by Yuan Yang in London and Kathrin Hille in Taipei More