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New President Faye passes the market test

Senegal’s bond sale signals that investors are gaining confidence in its new government

Senegal’s move to raise US$750 million of debt maturing in 2031 in two tranches at a coupon rate of 7.75%, signals the passing of an early test of market confidence for new President Bassirou Diomaye Faye in his government (AC Vol 65 No 7, Historic vote could set a new economic path).

The sale makes Senegal the sixth African nation to tap the market this year.

Increased African confidence in testing the bond market is also in evidence in Kenya, meanwhile, which has announced that it will use part of a $1.2 billion loan from the World Bank to make a $500m Eurobond payment that will mature later this month. The Kenyan shilling has strengthened and stabilised since a $1.5bn Eurobond issue in February, delivering the funds needed to service the Eurobond, and the Treasury has been supplemented by additional loans from the Bank and the International Monetary Fund (AC Vol 65 No 8, Austerity the price of debt workout dodge).

The Bank said in a report last week that the Treasury was planning to issue a series of new sustainability instruments such as debt swaps and sustainability-linked bonds in order to reduce its interest costs.

However, the Central Bank of Kenya has also disclosed that it earned $91.2m in interest from emergency lending to the Treasury in the financial year which ends on 30 June, evidence of the liquidity shortage that ministries have faced.

At 7.75% the yields on Senegal’s paper are better than Kenya’s. In April, the United Nations Conference on Trade and Development (UNCTAD) warned developing African countries facing a high risk of debt distress against issuing Eurobond debt, pointing to the high interest rates on offer (Dispatches, 23/4/24, UN agency warns against African Eurobonds).

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