Debt markets open again for sub-Saharan Africa – Fitch


By Tom Arnold

LONDON, Nov 30 – Ivory Coast, Ghana and Kenya may all tap international debt markets in 2021, Fitch Ratings said, as investor sentiment towards the region improves after the former’s recent 1 billion euros ($1.2 billion) issue.

But weaker-rated nations in sub-Saharan Africa may still face higher funding costs than before the coronavirus pandemic, which could discourage their return to markets, Fitch said in a report released on Monday.

Ivory Coast’s Eurobond, which was five times oversubscribed last week, was sub-Saharan Africa’s first of the pandemic era and underlined a recovery in investor confidence in a region that has lagged others in returning to the markets after the shock.

Ghana and Gabon both sold debt before the pandemic, but investor aversion heightened as the virus spread around the globe and concerns mounted about a deterioration in growth and public finances.

“We expect other sovereigns to follow Cote d’Ivoire in issuing Eurobonds in 2021, as market conditions have eased sharply,” Fitch said.

In a sign of improving market sentiment, the JPMorgan Emerging Market Bond Index (EMBI) Global spread for African issuers eased back to below 600 basis points in late November after spiking to more than 1,000 basis points on March 23, Fitch noted.

Namibia, Nigeria and South Africa will likely roll over maturing bonds in 2021 when they fall due, with the trio to conduct further issuance to meet funding needs, Fitch forecast.

Ivory Coast, Ghana and Kenya are also expected to return to the markets in 2021, with a possibility that other issuers, such as Benin, could join them, it predicted, given which countries had been expected to launch issues in pre-pandemic 2020.

But sub-Saharan Africa bond issuance may remain lower than in previous years, in part reflecting enhanced official creditor financing, Fitch said, with the International Monetary Fund and other official creditors continuing to provide strong support.

The G20’s Debt Service Suspension Initiative (DSSI), which can include caps on non-concessional funding, could be extended, Fitch added.

The initiative will conserve around $9.3 billion for Fitch-rated sovereigns in the region in 2020, with its extension to the end of June 2021 providing further support, it said. (Editing by Alison Williams)

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