African countries’ bond sales ‘raise refinancing risk’

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African countries’ recent flurry of debt-raising increases the risk that they will face refinancing problems, rating agency Fitch Ratings has warned.

Higher commodity prices and fiscal reforms in some countries have helped to stabilise debt levels in relation to economic growth in sub-Saharan Africa, Fitch said, but the growing use of international debt markets is adding an increasing debt financing burden to governments’ budgets.

Sub-Saharan African countries will have to repay $6.5bn of debt in the five years to 2023, up from $1.4bn in the last five years, according to Fitch. “[Debt] maturities appear manageable in the near term, but public financial management in the region is often weak, meaning that capacity to manage refinancing risk is an important factor,” Fitch said in a statement.

Investors’ hunt for yield has helped to expand the amount of capital available to African sovereigns; Kenya, Nigeria and Ivory Coast have all brought bond deals to the market since the start of this year, building on a rush of deals last year. The International Monetary Fund recently warned that emerging economies face the mounting risk of a debt crisis, as their pace of borrowing in the international capital markets increases.

Since 2013, the median ratio of public debt to gross domestic product in low-income countries has risen 13 percentage points to hit 47 per cent in 2017, according to new research by the IMF.

The research found that 40 per cent of low-income developing countries face “significant debt-related challenges”, up from 21 per cent just five years ago.

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Godwin Okafor is a financial journalist, Internet Social Entrepreneur and the Founder Naija247news Media Ltd He has over 16 experiences in journalism, which cuts across traditional and digital media. He started his journalism career in Business Day, Where he was a senior editorial graphic artist, before he left to start Naija247news, An Online Financial Newspaper in 2010. He has won series of awards and he is the chairman of Emmerich Resources Limited, the publisher of Naija247news.com and also sits on the board of Students In Business Awards, (SIBA).

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