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Donald Trump election could restrict Africa’s access to finance, says ODI

05.12.2016

It said countries with rapidly depreciating currencies will be hit by the impact of a US interest rate rise.

Donald Trump’s election could cause many Sub-Saharan African nations to refrain from issuing debt, according to the UK's Overseas Development Institute (ODI).

His win has all but guaranteed an interest rate rise by the US Federal Reserve later this month and opened the prospect of further rate increases in future, which could have "multiple channels of transmission" to Sub-Saharan Africa, the institution said in a paper seen by Public Finance International.

These could manifest as higher longer-term financing costs for developing and emerging economies, as well as making it more expensive to service existing debts. 

Higher US rates could also narrow the scope for countries wanting to tap into the global financial markets to finance infrastructure or other development projects.

Countries that will be particularly vulnerable in future include Nigeria, Zambia and Mozambique, where currencies have rapidly depreciated following the drop in oil prices.

The ODI said the effects of US interest rate rises in this countries will be compounded, further increasing the cost of servicing sovereign and corporate dollar debt.

It added that larger Sub-Saharan African economies with more developed financial sectors, such as Kenya, are already feeling the effects of the election.ADNFCR-2976-ID-801829365-ADNFCR