Trends and Developments in the Sub-Saharan International Sovereign Bond Market

Before 2006, only South Africa had issued a foreign-currency denominated sovereign bond in Sub-Saharan Africa. From 2006 to 2014, twelve other countries have issued a total of $15 billion in international sovereign bonds. This sudden surge in borrowing in a region that contains some of the world’s poorest countries is due to a variety of factors, including rapid growth and better economic policies in the region, high commodity prices, and low global interest rates. Increased global liquidity as well as investors’ diversification needs have also helped increase the attractiveness of the so-called “frontier” markets, include those in sub-Saharan Africa. Whether the rash of borrowing by sub-Saharan governments (as well as a handful of corporate entities in the region) is sustainable over the medium-to-long term, however, is open to question. In the medium-term heady economic growth may not continue if debt proceeds are only mostly used for current spending and debt is not adequately managed. Accelerating and sustaining the pace of fiscal reform and appropriate debt management policies should be a policy priority. In addition, “unconventional” measures such as developing a domestic regional bond market should be considered.