In recent years, several Sub-Saharan African (SSA) sovereigns, including Tanzania (B1 stable), Angola (B3 positive), and Côte d'Ivoire (Ba2 stable), have embarked on substantial institutional reforms aimed at enhancing governance and reinforcing their creditworthiness. These reforms are pivotal in managing the shared economic, social, and financial risks faced by these nations, particularly given the high correlation between default risks and weak governance. This article explores the various fiscal, monetary, and institutional reforms underway in SSA and their impacts on credit resilience.

Summary of Key Reforms and Their Impacts

1. Fiscal Reforms Enhancing Revenue, Spending Quality, and Transparency

   • Revenue Enhancement Initiatives:
     • Tanzania and Côte d'Ivoire: Both countries have implemented digitization efforts to boost tax collection. Côte d'Ivoire's taxpayer census and enhanced fraud controls have led to an increase in revenue from 13.7% of GDP in 2014 to an estimated 16.5% in 2023.
     • Angola: The introduction of a value-added tax and reforms to the taxpayer registry have significantly increased non-oil revenue. However, the country continues to face challenges due to limited economic diversification and high dependency on oil revenues.
   • Improving Public Spending Efficiency:
     • Côte d'Ivoire: The introduction of competitive bidding in the public procurement process has improved spending transparency and efficiency. Investments in the Court of Auditors and operational improvements in budget planning have further enhanced public financial management.
     • Tanzania: With technical assistance from the IMF, Tanzania has improved budget credibility, evidenced by better budget execution and reduced fiscal arrears. The Tanzania Instant Payments System is expected to further formalize the informal sector and broaden the tax base.
     • Angola: The fiscal responsibility law introduced in 2020 and efforts to phase out oil subsidies by 2025 have strengthened public financial management and spending efficiency.

2. Monetary Policy Reforms Promoting Price Stability and Foreign-Exchange Access

   • Price Stability Efforts:
     • Tanzania: Transitioned from a reserves-targeting framework to an interest-rate targeting framework, enhancing the central bank's ability to manage inflation and support economic growth.
     • Angola: Aligned the interbank rate with the policy rate and moved towards an inflation-targeting framework. Increased exchange-rate flexibility and plans to eliminate exchange restrictions are aimed at stabilizing prices in the long term.
   • Enhancing Foreign Currency Access:
     • Nigeria: The new administration has unified the exchange rate and decreased reserve requirements, improving access to foreign currency and boosting investor confidence. However, these reforms come with short-term economic adjustments, such as increased inflation and exchange-rate volatility.

3. Other Institutional Reforms Focusing on SOE Governance, Curbing Corruption, and Strengthening the Judiciary

   • State-Owned Enterprises (SOEs) Governance:
     • Tanzania: Undertook ambitious SOE reforms, consolidating inefficient entities and setting performance targets. These efforts have resulted in SOE revenues exceeding targets by 35% in fiscal year 2023.
     • Angola: Launched a privatization program in 2018 and strengthened corporate governance standards through the Institute of Asset Management and State Holdings, promoting adherence to international standards.
   • Anti-Corruption Measures:
     • Tanzania: The government's anti-corruption efforts, including the establishment of the High Court Corruption and Economic Crimes Division and a National Anti-Corruption Strategy, have improved the country's ranking in Transparency International's Corruption Perceptions Index from 119 in 2014 to 87 in 2023.
     • Angola: Introduced several anti-corruption laws and recovered nearly $13 billion in misappropriated state assets from 2017 to 2022, significantly improving its control of corruption indicators.
     • Côte d'Ivoire: Prioritized anti-corruption measures during President Ouattara’s third mandate, including a National Anti-Corruption Strategy and an online platform for reporting corruption, leading to improvements in corruption perceptions.

Conclusion

The institutional reforms in Tanzania, Angola, Côte d'Ivoire, eSwatini, and Nigeria are creating a foundation for enhanced governance and financial stability in Sub-Saharan Africa. These efforts, if sustained, hold the potential to strengthen creditworthiness and resilience against economic shocks. While these reforms are promising, a credible track record of implementation and continued institutional resiliency is essential for achieving long-term credit improvements. The progress demonstrated by these countries highlights the significant impact that well-targeted reforms can have on improving credit quality and governance.

References

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