Sub-Saharan Africa: Long-term debt inflows rise 34%, China biggest bilateral creditor.

Lagos, Nigeria, Capital Markets in Africa — The newly released 2016 edition of the International Debt Statistics (IDS) shows that external borrowing by countries in the Sub-Sahara Africa, excluding South Africa, has risen rapidly and been marked by a distinct change in borrowing patterns and creditor composition. Disbursements of long-term debt increased 34 percent in 2014 (to $54 billion), triple the comparable figures for other low- and middle-income countries, with private creditors accounting for 60 percent (50 percent in 2013). Disbursements from private creditors have also become more diversified. In 2010, all long-term private debt was attributable to banks and other private creditors, whereas in 2014, 27 percent was accounted for by bond issuance. Borrowing patterns have also changed with disbursements from private creditors now going primarily to non-guaranteed private-sector borrowers. Disbursements from official creditors (excluding the IMF) rose 30 percent between 2010 and 2013. The momentum continued in 2014 when they rose a further 8 percent to $21.5 billion. This increase was largely attributable to a 14 percent rise in disbursements by multilateral creditors, notably those from the World Bank. Disbursements from IDA, $5 billion in 2014, were unchanged from their 2013 level, but IDA remained by far the single largest multilateral creditor. China was again the continent’s most important bilateral creditor.

In addition, the IDS reveals that the net financial flows to Sub-Saharan Africa rose 10 percent in 2014, to $78 billion, with a 20 percent drop in net equity flows, more than offset by a 48 percent rise in net debt flows. The decline in net equity flows was driven in large measure by the $3.9 billion outflow of foreign direct investment from Angola and much lower net inflows of portfolio equity to Nigeria. Net debt inflows rose to $47 billion ($31 billion in 2013) of which 64 percent were accounted for by private creditors. Around 26 percent of net debt flows to the region went to South Africa: its share of comparable debt flows in 2013 was 11 percent. Net financial inflows to the region, excluding South Africa, fell 3 percent in 2014 with a 23 percent rise in net debt inflows, to $34 billion ($28 billion in 2013), not enough to offset the 23 percent drop in net equity flows.

Furthermore, the statistics shows that there is a rapid rise in sovereign bond issuance in some Sub-Saharan African countries. This includes those countries that have benefited from Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI) debt relief programs.  Benign global market conditions and the investor desire for higher returns have facilitated access to international capital markets. Sovereign borrowers, excluding South Africa, issued $6 billion in 2014, equivalent to 29 percent of disbursements from official creditors and 25 percent of foreign direct investment inflows. The debut sovereign bonds issued by Ethiopia ($1 billion) and Kenya ($2 billion) were massively over-subscribed, and the same applied for countries returning to the market, such as Ghana and Zambia. Proceeds of sovereign bonds are used to benchmark for future government and corporate bond markets issues, to manage the public debt portfolio, and for infrastructure financing. In Ethiopia, the 10-year, 6.625 percent Eurobond issued in December, 2014, is earmarked for development of sugarcane plantations, a hydropower dam, and amelioration and extension of the railway network.

This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank