East African economies on the bond trail

by Elayne Wangalwa 0

In East Africa, the sovereign bond craze is on the role with Tanzania the latest country targeting the market.

The East African country is planning to float 700 million US dollars in December to fund infrastructure projects. The country first planned to enter into the bond market in 2008 but was cut short in the wake of the global financial crisis. Tanzania has also been facing unsurmountable challenges for several years in securing positive credit ratings.

Earlier in the year, Kenya debuted in the Eurobond market, bringing in 2 billion US dollars. East Africa’s biggest economy secured bids worth 8.8 billion US dollars counter to the government’s target of 2 billion US dollars, making it the largest debut for an African country in the sovereign bond market. The government chose not to take more than what was required on the already oversubscribed bond.

Rwanda, East Africa’s first beneficiary into the market, plans to float a second sovereign bond in 2015 of as much as 1 billion US dollars after its oversubscribed debut bond. The country is banking on the success of its maiden 400 million US dollars Eurobond in 2013. Proceeds from the bond will be used to fund major infrastructure projects.

However, Uganda has said it will not partake in Africa’s sovereign bond craze. Nonetheless, the country plans to issue the country’s first municipal bond next year for its development instead.

Meanwhile, Ethiopia, sub-Saharan Africa’s fifth biggest economy and at the frontier of investment destinations will tap into the international bond market by early January for mega infrastructure developments. In May, the country received its first international credit ratings and was assigned a long-term foreign and local currency Issuer Default Debt Rating (IDR) of ‘B’ with a stable outlook by the international credit rating agency, Fitch Ratings.

Recently, the International Monetary Fund (IMF) warned African countries against dashing into the sovereign bond market saying that it comes with some risks. This year alone the lender has witnessed about 7 billion US dollars in sovereign bond issues, a record high for the region.