Africa: 41 out of 54 African countries are expected to register a nominal depreciation of their national currencies in 2022

41 out of 54 African countries are expected to register a nominal depreciation of their national currencies against the dollar during the period from the end of 2021 to the end of 2022. This is according to a report by the Economist Intelligence Unit (EIU), released this week.

According to the institution, this forecast is motivated by the risks that still weigh on African economies, despite the post-covid-19 global economic recovery. These risks could complicate the implementation of certain trade and investment agreements on the continent.

“Increased currency volatility is expected given the varied and conflicting factors that will befall the region, including the lasting effects of the pandemic and modest economic recoveries, strained national finances and commodity markets. bullish firsts, the search for yield by international investors and a rise in annual inflation, in particular”, indicates the document consulted by the Ecofin Agency. According to the EIU, this depreciation should accentuate the inflationary pressures which have accelerated in recent months in several African countries.

It should be emphasized that this report comes in a context where the long-awaited economic recovery in Africa is undermined by difficulties concerning in particular the slowness of the vaccination campaign on the continent, the emergence of new variants and the persistence of political and security crises. .

According to the EIU, Ethiopia and Sudan, two countries in the midst of a political and security crisis are expected to record the largest depreciations of their currencies in 2022. A situation that comes as public financing needs continue to increase pushing African countries to borrow more and more on the bond market to fill this gap.

In 2021, several countries in sub-Saharan Africa, including Benin, Kenya, Senegal, Ghana and Côte d’Ivoire, succeeded in raising significant financing on the bond market in the midst of the covid-19 pandemic. According to the IMF, the economic recovery of sub-Saharan Africa in 2022 is expected to be weaker than that of last year. It is expected at 3.7% this year against an estimate of 4% for 2021.

“Nearly 30 African states will experience average annual consumer price inflation of 5% or more in 2022, while ten of them – including Angola, Ethiopia, Nigeria, Zambia and Zimbabwe – will have a double-digit inflation rate,” says the EIU.