Omni Whittington Commentary, March 2006

Zimbabwe – Mixed News

Zimbabwe last week made a $9m payment to the IMF. With this payment the arrears to the General Resources account seems to be completely settled, which removes the risk of expulsion from the IMF. The good news is that Zimbabwe has kept its promise made last September that it would clear the debt by February 2006. The bad news is that it seems Zimbabwe resorted to printing money to settle the debt. Zimbabwe’s central bank just disclosed that it printed a staggering ZWD 21trn ($211.68m) in 2005 to buy foreign currency to pay off debts owed to IMF. This to a large extend explains the current inflation level of 613%, which is expected to further increase to 800%. These facts and figures do not really signal an economic and/or policy improvement, causing the short to medium-term outlook for distressed Zimbabwean trade debt to remain negative.

Angola – Positive Outlook

High oil prices mean that the Angolan state budget currently looks much better than it has for a long time. Furthermore, rumours have again appeared that the Paris Club is preparing for an Angolan debt treatment. Although quite a number of political and economic hurdles need to be taken in order to successfully complete such a process, it certainly signals positive developments for Angolan debt holders. More than with most other African nations, there is still a substantial amount of Angolan defaulted government guaranteed trade debt in the market. The value of these debts has gradually increased during the last years to levels between 50% and 60% of principal, and trading is taking place quite regularly. Our view is that current prices do not leave much room for further increases.

Holders of Angolan trade debt are invited to contact us. For general brokerage requests or more information on exotic debt, debt conversion and a complete list of prices, please contact:

Raymond van Hulst on vanhulst@omniwhittington.nl

Heleen Rijkens on rijkens@omniwhittington.nl

For a PDF of prices, click here