Africa eurobonds Q2 2023

At end-June 2023 there were $143 billion (face value) of African sovereign eurobonds outstanding, currently valued at around $107 billion by the market. This includes Zambia ($3 billion face) and Ghana ($13.2 billion face) eurobonds that are being restructured following defaults.

African eurobond yields remain elevated, although a June rally helped bring them down a bit. The situation for African sovereign eurobonds was mirrored in emerging markets across the globe that don't have an investment grade credit rating. I wrote how spreads have been elevated globally for over a year now (70 weeks in Tibet). As ever there's a huge range in yields across African countries.

For most countries spreads have widened over the first half of 2023, with Egypt's eurobonds suffering the most as they fail to deliver on planned reforms. Conversely Nigeria's eurobond yields have improved year-to-date as reforms initiated under the new President have surprised to the upside.

No African sovereign eurobonds were issued during the second quarter of 2023. This followed a quiet first quarter (Q1 2023 update). There's generally been a drought of African eurobond issuance since the US Fed began on its hiking cycle. That said in April there was a nice addition to Africa's corporate eurobond universe with a $300 million 5 year debut eurobond from Mauritius Commercial Bank (priced at 7.95%).

During the IMF Spring meetings there was lots of chat on debt (I wrote up my thoughts on the meetings here). Not a lot actually happened, but the talks set the scene for progress later in the quarter. A sovereign debt round table was held that continued on the path of getting all stakeholders together, whether or not they are members of the Paris club. There is lots on debt restructuring in my book (link here) or in some of my Bond Vigilantes pieces (one here) that sets out why the IMF's role is so important.

Snippets

• Ghana and Zambia kept working on restructuring their debt. Zambia had a breakthrough with a landmark debt reduction agreement made with bilateral creditors (including China) that allows them to now properly start negotiating a eurobond exchange.
• Rwanda repaid the final amount of its debut eurobond. I wrote about this (link here).
• Kenya up-sized its IMF program. Although this didn't stop Moody’s putting their B3 rating on review for a downgrade (S&P and Fitch are a notch higher on a B). The government pledged several times its commitment to find a way to refinance the June 2024 eurobond.
• Fitch assigned Tanzania a new B+ rating (Moody’s has them on a B2).
• Fitch downgraded Tunisia to CCC- having upgraded them to CCC+ on the hope of a IMF staff agreement.

Other bits to read

• Some smart economists at the IMF published an interesting paper exploring why African countries' borrowing costs are high (link here).
• I was happy to have my?#Africa?debt book quoted in?The Economist. My points relate to the diversity of debt situation found across 55 African countries using a typology I developed for my book (link to the article here).