On the 22nd local time, the US Federal Reserve announced another interest rate hike, and its crazy interest rate hike intensified the turmoil in Africa's banking industry and triggered the devaluation of African countries' currencies. Affected by the dollar's interest rate hike, central banks in many African countries in March were ready to raise interest rates to curb inflation and stop asset sell-offs intensified by pressure from the banking systems in the United States and Europe. In this context, developing countries such as Africa are facing severe challenges, and the US dollar interest rate hike is weakening the continent's economic recovery prospects.
Kenyan shilling "falls" Kenya's central bank raises interest rates to fight inflation
As of March 20, local time, the Kenyan shilling has experienced 60 consecutive days of decline. Affected by the rise in interest rates of the US dollar, the decline in foreign exchange reserves and the deterioration of the balance of payments, some institutions predict that by the end of the year, the exchange rate of the Kenyan shilling against the US dollar is expected to be as low as 161.40:1.
As of March 16, local time, Kenya's foreign exchange reserves fell to $6.56 billion, the lowest in 11 years. After the annual inflation rate accelerated to 9.2% for the first time in four months in February, the Bank of Kenya decided on March 29 to raise its benchmark interest rate from 8.75% to 9.5%, exceeding the previous expert forecast adjusted to 9%, which also brought borrowing costs to a five-year high.
△ Recently, the Kenyan shilling has been depreciating against the US dollar, about 130:1
Experts said that in order to further stabilize inflation expectations, Kenya's central bank was forced to follow the Fed's lead and raise interest rates to prevent a sell-off in Kenyan shillings, further weighing on the country's economy.
Ghana's currency, the cedi, depreciated by nearly 50% against the US dollar
On March 27, local time, the Central Bank of Ghana said that the Monetary Policy Committee raised the key interest rate by 150 basis points to 29.5%. Ghana's currency has been depreciating due to concerns about its ballooning debt burden, inflation, and the MPC has raised interest rates by 16 percentage points since November 2021 to halt a nearly 50% decline in the Cedi against the US dollar.
Ghana's inflation rate has been above target for 18 consecutive months, with inflation more than five times the upper end of the central bank's target range.
△Ghana's rising inflation has caused market concerns
The depreciation of the currencies of many African countries The development prospects of major economies are worrying
The South African rand, the rand, has lost about 7% of its value against the dollar so far this year. The latest data from the South African Bureau of Statistics showed that the South African consumer price index (CPI) rose 7.0% year-on-year in February, slightly up from 6.9% in January. Separately, South Africa's core inflation, which excludes food and energy price volatility, increased to 5.2% in February from 4.9% in January. The rise in core inflation also signaled to the South African Reserve Bank that the current rate hike may not curb inflation as expected.
In addition to South Africa, the currencies of Egypt, Zimbabwe, Sudan and other countries have also experienced large fluctuations, causing market concerns. The Federal Reserve aggressively raised interest rates, investors dumped depreciating currencies and bought dollar assets for high returns, and developing countries in Africa and other regions faced the shock of currency depreciation.
The appreciation of the United States dollar has led to high international food and energy prices in dollar terms, and high inflation rates in African countries may lead to food security problems and even social unrest. In fact, since last year, many countries such as Kenya and Ghana have seen demonstrations protesting the high cost of living.
△ The US CNBC issued a document saying that the Fed's interest rate hike and the strengthening of the US dollar have increased the risk of political instability in Africa
Media people: The United States should not weaponize the dollar
On the 28th local time, British media person Bobby Nadri wrote that Washington frequently weaponized the dollar and put economic pressure on countries that do not safeguard US interests, which is a huge mistake. The United States' use of the dollar's influence as the world's reserve currency puts countries that run counter to its foreign policy goals under enormous economic pressure.
Bobby Nadri pointed out that the United States is to blame for the current instability of the global financial system. By using the dollar as a weapon, the United States jeopardizes the integrity of the global financial system.
Expert: The strengthening of the dollar has a ripple effect in Africa
American economics professor Jonathan Munemo recently wrote an article entitled "Dollar Strengthening: African Countries Feel Pain, But Few Policy Options." As a stronger dollar has a ripple effect in Africa, trade volumes are squeezed, trade financing conditions tighten, sovereign debt has soared, debt servicing costs have soared, and people are feeling more pain. But African countries have limited policy options to deal with a strong dollar, and most are facing challenges. High interest rates have increased the debt-servicing burden on African governments and heightened concerns about debt sustainability. The International Monetary Fund and the World Bank consider many African countries to be at high risk of debt distress.
While African countries have chosen to raise interest rates in response to currency depreciation pressures brought about by a strong dollar, some experts say that if interest rates continue to rise, they will squeeze economic output and may lead some economies into recession. (Main station reporter Ma Peimin)
Source: CCTV News Client