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Some 20 African countries have an outstanding debt of $92b in sovereign Eurobonds

African governments announce the selling of Eurobonds with fanfare, but African countries are becoming increasingly burdened with debt through the sale of international bonds, some with interest rates of about 10 per cent.

Between 2008 and 2018,  some 20 African countries have issued Eurobonds. The countries among them have an outstanding $92 billion debts in sovereign Eurobonds with South Africa holding the highest – the country has outstanding sovereign Eurobonds of $1.79 billion.

The countries are Ghana, Senegal, Nigeria, Morocco, Tunisia, Egypt, Cote d’Ivoire, Ethiopia and Gabon. The others are Congo Republic, Tanzania, Namibia, Mozambique, Zambia, South Africa and Seychelles. The rest are Kenya, Cameroon and Angola.

In a presentation at the Consultative Workshop on Finance and Development organized in Accra by the Third World Network February 19 to 21, 2019, Dr. Fanwell Kenala Bokosi, the Executive Director of African Forum and Network on Debt and Development indicated that Ghana, was the first country which has benefitted from the International Monetary Fund (IMF’s) Highly Indebted Poor Country (HIPC) to issue Eurobonds. Ghana issued Eurobonds of $750 million in October 2008.

Dr. Bokosi pointed out that there is a new wave of external borrowing by African governments that is not from the development banks.

“Over half, about 53 per cent have yields greater than seven per cent. Senegal, the yields for Ivory Coast, Gabon and Zambia Eurobonds exceed 10 per cent of their 2019 GDP,” he said.

He further noted that while the average yield of African Eurobonds increased from 5.3 per cent to 7.4 per cent, African yields are 2.9 percentage points higher than the rest of the world.

According to Dr. Bokosi, there are implications of the yields of the bonds. For example, on bonds of $1 billion at 5.3 per cent, a country will be paying $53 million a year which is a total of $530 million in 10 years. And with an interest rate of 7.4 per cent, a country would pay $74 million a year and $740 million in 10 years.

He said there are other factors such as exchange rate risks and the fact that some of the bonds, about 96 per cent have fixed rates.

African countries in this situation of debt distress, would continue to borrow to repay debts, which itself creates room for other risks such as corruption.

According to the Third World Network, the objectives of the workshop among others is seeking to improve understanding of the issues and challenges on the terrain of finance and development in Africa today; define priority issues and agenda for research and advocacy and set up a platform for collaboration around this agenda.

Participants attending the consultation include policy makers, scholars and activists from Africa, and from Europe, Asia and North America.

By Emmanuel K. Dogbevi
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