TIMES are tough in Africa. Ebola, in addition to claiming many lives, has also damaged economies. Tourism is suffering as frightened foreigners stay away. Falling commodity prices are also taking a toll. Investors are pulling money out of riskier spots, prompted by the prospect of rising interest rates in America. The IMF is cutting its growth forecasts. So is the unfolding public-debt crisis in the Gambia, which has suffered from all these trends, a harbinger of things to come?In mid-January the IMF announced that it is considering a bail-out for the Gambia. In part, the problems of the tiny west African country of 2m stem from a 60% fall in tourism, the source of 30% of its export earnings. (Although it has not suffered a single case of Ebola, it is close to Guinea, one of the most affected countries.) Falling commodity prices mean that exports of wood and nuts will also bring in less. No wonder the local currency, the dalasi, fell by 12% against the dollar last year.A weak currency is a worry, since Gambians rely heavily on imported food. Two-thirds of the public debt is denominated in foreign currency. To prop up the dalasi the central bank has raised interest rates from 12% to 22% over the past two years.But it is mismanagement of the government’s finances that has pushed the Gambia over the edge. From 2009 to 2014 its debt-to-GDP ratio increased by 18 percentage...
from The Economist: Finance and economics http://ift.tt/1zgwwPA
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