As of August 2023, 19 African countries had 91 active, US$-denominated Eurobonds. With a final debt repayment date of September 2061, the values of annual debt repayment vary across countries and are largely dependent on their coupon rates- with some as high as 9%.
Here are three big takeaways from our analysis:
- 66% of active Eurobonds have been issued by five countries, namely Angola, Egypt, Ghana, Nigeria, and South Africa. In monetary terms, Africa’s active Eurobonds have a combined face value of US$111 billion, 71% issued by the five countries.
- Between 2024-2061, our analysis forecasts 14 calendar years as the ones anticipated to have the greatest number of African countries facing fiscal challenges in making coupon and bond repayments. In some cases, countries will have as much as US$5 billion in Eurobond debt servicing obligations alone.
- Under current borrowing terms, African economies will continue to be fiscally choked and may need to trade off debt servicing obligations at the expense of urgent national and regional development priorities.
So in 2024, what should African leaders and civil society focus on to fast-track transformational shifts in the global financial system? We have three key suggestions:
- There needs to be an annual report of different creditors to Africa. First, the very fact that this report is the first of its kind speaks volumes. Over the last 80 years, creditors have regularly come together to coordinate their impact and development work in specific countries. In order to move to a more “borrower-centric” system, borrowers such as African countries need to examine their creditors and commonalities and differences as well, including at times of financial strain. There is a strong case for African institutions providing annual reports such as these as a public good to African governments and the public during times of financial strain.
- African countries should always aim for longer maturities and take measures to counter the African risk premium. Learning from Egypt’s 2010 shift away from 10-year Eurobond issuance, other African countries have since followed suit by issuing Eurobonds with longer-term maturities. By extending these timelines, annual coupon payments are compressed and over a longer period, giving borrowers more fiscal space and reducing debt default concerns. Additionally, such efforts need to be combined with an aggressive and unified campaign by African countries to counter decades of an “African risk premium”- the biased perception by credit rating agencies that makes borrowing on international capital markets more expensive for African countries than their global peers.
- Over the next 4- 5 years African countries should consider Eurobond buybacks to avoid very predictable fiscal strains. Debt “buy-backs”, also known as debt repurchase or debt redemption, are a key means for governments to manage their debt service payments or liabilities. They involve a company or government repurchasing its own outstanding debt securities from investors before the debt’s maturity date. This process can be advantageous for the issuer and can have various financial and strategic implications, such as reduced interest expenses.
You can download the full report in English here.
