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Ivory Coast is preparing to sell the first US dollar bond issue by a sub-Saharan African state in almost two years, in a test of whether nations on the riskier frontier of the developing world will be able to return to debt markets in 2024.
The world’s biggest cocoa producer plans to issue a nine-year US dollar sustainability bond, where proceeds are usually earmarked for social projects, and a conventional 13-year bond, according to an offering memorandum sent to investors on Monday.
Ivory Coast also intends to buy back portions of bonds maturing in 2025 and 2032, according to the memorandum. The country’s finance ministry did not immediately respond to a request for comment.
Ivorian President Alassane Ouattara signalled this month that his government would soon sell an international bond, positioning the country to join a rush in emerging markets to issue foreign currency debt and take advantage of a decline in borrowing costs.
Investment-grade countries such as Mexico and Indonesia have led the issuance so far this year, but lower-rated African borrowers have so far remained on the sidelines.
Angola and South Africa, two of the region’s biggest economies, were the last to issue foreign currency bonds in 2022, before a global rise in interest rates in effect shut off market access to borrowers with lower credit ratings. Since then, a surging dollar, tumbling local currencies and a drop-off in Chinese loans to the continent have all raised investor doubts that many hard currency debts could be repaid. Last year was the first since 2009 without any external debt issuance in sub-Saharan Africa.
However, despite fears of a wave of defaults, Ethiopia was the only country in the region to halt bond payments and seek to restructure its debts in 2023.
Many African governments are hoping bond markets will reopen to them this year, allowing them to refinance maturing debts at affordable interest rates and avoid the need to draw down foreign exchange reserves to pay them off.
About $5bn of African sovereign foreign currency bonds will become due this year, and a further approximately $6bn next year, according to Moody’s estimates.
Yields on the dollar bonds of Ivory Coast, which carries a so-called “junk” rating from agencies, have recently fallen to between 7 and 8 per cent, signalling that the country could borrow at similar levels in the coming bond sale, based on a reputation for relative economic stability.
Ouattara presides over an economy that is forecast to grow 6.5 per cent this year, compared with less than 4 per cent for the continent as a whole, according to the World Bank. “We are positive on Ivory Coast, due to their institutional strength and high growth,” said an investor looking at the bond deal.
One option to help deal with looming external debt maturities this year is for African states to access cheaper loans from the IMF and development banks, in return for conditions on policy. Local currency bond markets are rarely deep or cheap enough to fill all of the funding needs for African governments.
Kenya in particular is juggling a payment due in June on a $2bn dollar bond that the east African country sold a decade ago as part of a rush by frontier economies to take advantage of then-low US rates.
As it gathered resources to help finance the bond payment, last week President William Ruto’s government gained access to nearly $1bn in additional lending from the IMF, and received a $210mn loan from the Trade and Development Bank, a regional multilateral lender.
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