Kenya’s announcement that it has dropped plans to sell dollar bonds makes it all but certain that 2023 will end without a single international bond offered by a sub-Saharan African nation.
The emissions drought shows the disproportionate impact that higher US interest rates are having on the world’s poorest continent, as rising borrowing costs force African governments to tighten their belts, restructure debt or looking for alternative financing.
The last time sub-Saharan African countries went an entire year without an international bond sale was in 2009, in the midst of the global financial crisis.
“It’s prohibitively expensive for them,” said Thalia Petousis, portfolio manager at Allan Gray, who said she doesn’t foresee a recovery anytime soon. “I expect African sovereign issuance to be more subdued than in the last decade” due to structurally higher interest rates in developed markets, she said.
Controversial and protracted debt restructuring negotiations with Zambia and Ghana, which have both defaulted, will continue to dampen the appetite of fiscally weaker countries in the region, while those with “reasonably good metrics” such as Côte d’Ivoire and Senegal may have better luck in 2024.
Concessional Financing
With the international bond market closed, institutions such as the International Monetary Fund and the World Bank are playing more important roles. More than a third of African countries have received disbursements so far this year, a trend that is likely to continue into 2024.