Nigeria will adopt an inflation targeting framework and a flexible exchange rate by 1 January 2009. By 1 August 2008, the currency will be redenominated, with 100 old nairas equating to 1 new naira. Additionally, in an attempt to better manage naira liquidity, the central bank announced that an unspecified portion of government revenues allocated to federal states will be denominated in US dollars rather than naira. Analysts say this move will add liquidity to the banking sector and make pricing goods easier.
China’s ministry of finance will issue special RMB 1.55 trillion bonds in two RMB 600 million batches and one RMB 350 billion batch. This special bond is a means to acquire foreign currencies from the central bank’s FX reserves, contributing to the capital base of China’s newly established wealth fund. A third-party institution will handle the issue because it is illegal for the central bank to subscribe to government bonds, in order to avoid direct monetization of government deficits. (For more analysis on the China’s State Investment Corporation, please click here)
Egypt announced cuts to gas and electricity subsidies for energy-intensive companies. It will increase the price of natural gas to $2.65 from $1.25 per million BTUs over the next three years and adjust electricity tariffs. After this period, prices will be linked to international market rates. Trade and Industry Minister, Rachid Mohamed Rachid, said the new scheme could save the government around EGP 30 billion (4.1% of GDP) over the next five years.
Romania’s current account deficit widened by €1.9 billion in June, bringing the 12-month deficit up to 13.2% of GDP compared to 12.8% in May. Analysts say that 64% of the current account deficit in the 12 months to June was financed by FDI inflows. Analysts are concerned about the country’s imbalances and the government’s poor policy responses. (For more analysis, please click here)
Standard Bank Group saw its profits rise by 29%, boosted by strong borrowing by companies and consumers in South Africa. The bank, which is Africa's largest lender, saw its net income in the first half of the year, rise to $857 million. (For more analysis on prospects for continued economic growth in South Africa, please click here)