Lagarde Expresses Concern That Africa’s Sovereign Debt Is RisingRene Vollgraaff
Some African countries have issued too much debt and possible added monetary stimulus in Europe that may boost demand for emerging-market assets could further increase the burden, the International Monetary Fund said.
“There are some countries that have gone a bit ahead of themselves, and that are rising the level of indebtedness to a level which could be a concern,” Managing Director Christine Lagarde told reporters today in the Mozambican capital, Maputo, during an conference hosted by the lender.
Sovereign debt issuances in sub-Saharan countries may reach $6 billion this year, after a record $6.25 billion in sales in 2013, as the U.S. cuts back on monetary stimulus that had driven bond sales in developing nations, according to Fitch Ratings. Kenya, East Africa’s biggest economy, and Ivory Coast, Ghana and Senegal in West Africa are among nations planning to sell $500 million to $1.5 billion of Eurobonds each in 2014.
Zambia has been the only African country so far this year to tap international dollar-debt market, raising $1 billion in April in an offer than was about four times oversubscribed.
European Central Bank President Mario Draghi said on May 8 that the Governing Council was “comfortable” taking measures to boost inflation in the euro area. The ECB’s next policy decision is due on June 5.
“If not well communicated, if not well anticipated, it would bring about a level of volatility which could be detrimental,” Lagarde said. “It is a potential risk, but one that I hope can be mitigated.”