Ethiopia mulls Eurobond return
GlobalMarkets, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
Emerging Markets

Ethiopia mulls Eurobond return

World’s poorest sovereign Eurobond issuer could return to market next year, despite investor unease at Africa’s exposure to rising US rates and falling commodity prices.

Ethiopia could return to the international bond markets as early as next year, finance minister Sufian Ahmed told Emerging Markets. The country first tapped the Eurobond markets in late 2014, becoming the poorest country to do so in recent memory, according to London brokerage Exotix.

The minister said the decision to issue would be based on the infrastructure investment needs of a new five year plan — likely to include hydroelectricity, railways, roads and an airport. “These are the projects that will benefit when we come to the market,” he said.

Ahmed said the next five year plan had been finalized, though it was still to be approved by parliament — he said this was likely to happen within the next two months, making 2016 “a good time” to access the market.

“By then [2016] the five year plan will have been approved, and the projects that have been benefitting from the previous bond will have been completed.”

Ahmed stressed that the projects in which Ethiopia said it would invest the proceeds of the last bond — including an export orientated industrial zone aimed at attracting foreign manufacturing firms, and a sugar plant — were already under construction.

The minister’s attendance at the IMF meetings comes soon after a non-deal roadshow ending in the US. The roadshow was intended to update investors on the latest macro-economic, security and political situation in Ethiopia, as well as on the contents of the new five year plan.

Ahmed said the idea for a return to the market was “positively received” by investors. He said the size would depend on “demand and prevailing market conditions”, but that it would be at least as large as the last bond ($1bn).

Ethiopia’s possible return to the market comes as other African sovereigns are suffering from rising US rates at the same time as a drop in export earnings due to lower commodity prices. Zambia issued in the Eurobond market this summer for the third time, after a 2012 debut, paying a higher coupon than Ethiopia, while Ghana has been forced to seek IMF funding.

Ethiopia’s star has risen, however, thanks to its ability to gain foreign investment and export earnings outside commodities, especially in light manufacturing, thanks to cheap labour and electricity from hydro.

“We are monitoring the debt situation of the country,” said Ahmed. “The money we have used is for infrastructure development, not consumption. Once these projects are completed they will generate foreign exchange earnings for Ethiopia.

“We will not reach the situation where the debt of the country is unsustainable.”

Gift this article