- November 8, 2021
- Posted by: admin
- Category: Current News
As the COVID-19 pandemic evolves, governments in developing countries continue to face significantly high financing pressures to cope with the crisis. The International Monetary Fund (IMF) estimates that, to strengthen the pandemic response and accelerate income convergence, sub-Saharan African (SSA) countries face additional external funding needs of US$425 billion over the period 2021 to 2025. However, the region can cover only a portion of these needs on its own due to significant decline in traditional domestic revenue caused by the pandemic. Moreover, foreign grants and concessional loans have declined drastically over the past decade, severely affecting governments’ capacity to finance development priorities.
The pandemic provides a valuable opportunity for governments in SSA to explore other market-based financing options. One such financing option is the issuance of sovereign bonds on the international capital market. After a closure in early 2020, international capital markets have reopened for SSA countries, with Côte d’Ivoire, Benin, Kenya and Rwanda successfully placing Eurobonds at favourable yields. At a time of near-zero policy rates in advanced economies, other countries in the MEFMI region could similarly consider new issuances of longer maturities not only to buy-back existing Eurobonds and proactively address upcoming debt burden in line with debt management strategies but also take advantage of the conducive market conditions to replenish international reserves, accelerate financing of strategic projects that support recovery from the economic downturn triggered by the COVID-19 pandemic.
Access to international capital markets is a relatively new phenomenon in the region, and sovereign issuers rely on outsourced international advisors for managing international sovereign bond transactions, as in-country knowledge and expertise is still lacking. As part of efforts to support countries close the knowledge gap, MEFMI conducted a virtual course on International Sovereign Bond Issuance to discuss strategic and operational considerations for accessing international capital markets and best practices in preparing for an issuance. The course was held from 4 – 8 October, 2021 and a total of 56 officials from 12 MEFMI member countries, namely Angola, Botswana, Eswatini, Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, Zambia, and Zimbabwe, participated in the course.
The course enhanced participants’ understanding of strategic and operational issues in international sovereign bond issuance. With this knowledge, participants are expected to interact effectively with different stakeholders in the international market for better outcomes and manage the costs and risks of their public debt portfolios to safeguard debt sustainability.
The course was facilitated by a team of resource persons comprising sovereign and international debt market practitioners. The sovereign debt practitioners were Mr. Jacob Mkandawire (Bank of Zambia), Mr. Samuel Arkhurst (Ministry of Finance, Ghana), and Ms. Helvi Fillipus (Bank of Namibia). International debt market practitioners were from Rand Merchant Bank (Mr. Harris Hadjitheoris, Ms. Suliyat Adeleke and Mr. Lwandile Nene), White & Case LLP (Ms. Melissa Butler and Ms. Jessica Oliver), Africa Legal Support Facility (Ms. Toyin Ojo), and Trade and Development Bank (Dr. Felister Kivisi). Mr. Tiviniton Makuve of the Secretariat was also part of the resource team.
MEFMI plans to hive-off some topics and offer them as stand-alone courses to widen the scope for content to be pitched to the level that better captures the intricacies of each topic, knitted closely with a practical guide on how processes and strategies could be tailored to country circumstances, including tips specific to each stage of the issuance process.