In writing that “given the external demand, issuing [debt] overseas can be a cheaper option for African governments and corporations than their relatively small domestic debt markets, provided they can offer a bond big enough to whet foreign appetite,” a recent piece on rising Africa bond issues notes, for example, that “Ghana’s Eurobond was issued with a coupon of 8.5 percent, compared with the 13.95 percent on a three-year note issued locally the same year.” In whole, sub-Saharan debt issuance totaled $5.6 billion in the first nine months of 2010, down 30 percent year-over-year but well above the $1.6 billion in the first nine months of 2008, according to Thomson Reuters data.
Ghana’s bond is somewhat infamous in that it was the first dollar-denominated debt issued by a sub-Saharan government apart from South Africa and is labeled by some as a “benchmark” for African frontier debt; its yield spiked above 23 percent in 2008 but has consistently made new lows this year, falling to 5.746 earlier this month for instance. Moreover, a recent data overhaul revised 2009 output by 75 percent and allowed it to “leave the ranks of the World Bank’s low-income bracket of countries such as Liberia and Afghanistan [in order to] join the more affluent ranks of Thailand and the Ivory Coast.” This only a few months after S&P downgraded its credit rating to B, citing concerns about large fiscal deficits and a lack of clarity on oil-industry laws (the country is due to begin the production and export of 120,000 barrels of oil a day in 2011). Moreover, finance minister Kwabena Duffour noted last week that the cash budget deficit would narrow to 7.5 percent of GDP next year from roughly 9.7 percent in 2010, and proceed to drop to 4.7 percent in 2012 and 3 percent in 2013. The changes “should foster a rating upgrade,” per one analyst.