Political risk update

In a September risk bulletin broker Jardine Lloyd Thompson (JLT) issued an update on the geopolitical situation in several countries. Some of the key observations are summarised below.

Pakistan

Pakistan’s economy was on the brink of collapse before the devastating floods destroyed $43bn worth of agriculture and infrastructure, said JLT. The government will be forced to increase borrowing, raising inflation by 15-20%.

Senegal

President Abdoulaye Wade is searching for ways to prolong his time in government, raising tensions and political risksk, said JLT. If Wade does stand for a third term there may be more popular unrest. But if he steps down it could be equally destabilising.

South Africa

1.3m state railway, port, mine, school and healthcare workers went on strike in South Africa. The Unions are encouraging the workers to accept the government’s offer of a wage increase and 1,000 rand towards housing costs, said JLT. But the wage increases will hit state coffers.

Sudan

Government reserves have been hit by inflation and low oil prices. Tensions are mounting between the Khartoum government in the north and the semi-autonomous southern region. The fiscal crisis is likely to lead to payment delays for companies doing business with Sudan, said JLT.

Tajikistan

The capability of Islamic terrorists to carry out attacks in Tajikistan has increased, said JLT. A ambush on a military column killed 23 soldiers on September 19. It demonstrated the weakness of Tajikistan’s security forces. A clampdown on Islamist activity is likely.

JLT also drew attention to France, where 2 1/2m demonstrators took to the streets in defiance of President Sarkozy’s pension reforms. The President’s measures to increase the retirement age to 67 from 65 will succeed, said JLT. But the strikes show that the public is opposed to the government’s austerity measures.