Funding Ebola fight is draining economiesComment on this story
The worst Ebola outbreak is straining the finances of affected governments, with Sierra Leone using treasury bills to fund the fight against the virus as mining companies halt operations to protect workers.
Emergency aid of as much as $260 million (R2.8 billion) was being prepared by the World Bank and the African Development Bank to limit the economic fallout on Sierra Leone, Guinea and Liberia, the lenders said this month.
In the outbreak in four west African nations, Ebola had killed at least 1 229 people, or about 55 percent of those infected with the disease, for which there is no cure, the World Health Organisation said in a statement yesterday.
“Governments are almost totally reliant on international aid and health-care expertise to co-ordinate and fund the containment strategy,” Charles Laurie, the head of Africa risk analysis at consultancy Maplecroft, said. “The selling of debt remains a poor option for impoverished west African countries seeking to fund the fight.”
Sierra Leone auctioned 87.1 billion leones (R208 million) of bonds on July 31, with the 364-day debt selling at 6.64 percent, up from 6.27 percent at a July 24 sale. Matthew Dingie, the head of budget and research at the finance ministry, said the proceeds were being used to battle Ebola.
Liberia issued 144.6 million Liberian dollars (R17m) of 91-day notes at 3.9 percent last month, up from 2.2 percent at a debut sale in May. Guinea sold 100 billion francs (R151m) of 364-day bills at an average yield of 10.8 percent on August 13, from 9.39 percent a week earlier.
Business and transport disruptions, plus higher health expenditure, may pressure budgets and jeopardise growth.
British Airways has halted flights to Liberia and Sierra Leone and Kenya Airways will stop flying to the nations.
The three countries had a combined gross domestic product of about $13bn last year, according to International Monetary Fund estimates.
Companies including palm oil producer Sime Darby and steel maker ArcelorMittal are scaling back operations.
The outbreak has spread to Nigeria, where four people have died. The disease is treated by keeping patients hydrated, replacing lost blood and using antibiotics to fight opportunistic infections.
While Nigeria has managed to contain the disease, the consequences for the west African oil and gas industry “would be considerable” if it spread further, Matt Robinson, a senior credit officer at Moody’s Investors Service, said.
Nigeria’s $500bn economy is Africa’s largest, it is also the continent’s biggest oil producer, and, with about 170 million people, its most populated.
Ebola was threatening to erase the progress Liberia had made since the civil war ended in 2003, vice-president Joseph Boakai said earlier this month. The $2bn economy relies on World Bank aid and grants for about a third of its budget.
Appetite for investment in the countries is waning, with Sierra Leone saying last week it had suspended the sale of two-year bonds that would have been the first open to foreigners and that it would probably miss its growth target of 14 percent.
“Western leaders and multinational organisations will be compelled to provide longer-term funding assistance even once the outbreak is under control,” Laurie said. “Impacts on local economies are profound, with communities facing food shortages and severe interruptions to business operations and services.” – Bloomberg