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Beyond Aid: How Much Should African Countries Pay to Borrow?

Author/Editor: Gueye, Cheikh A. | Sy, Amadou N. R.
Authorized for Distribution: June 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,241KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Post debt relief, the number of African countries considering accessing international capital markets, often to fund large infrastructure projects, is increasing. Potential risks of capital inflows are well known but the literature offers little help to estimate the cost of borrowing internationally for the first time. This paper proposes a two-step approach to estimate the sovereign credit rating and interest rate cost of a country considering borrowing externally. Estimates can be used to assess the costs and benefits of different financing options. The method can also be used to construct foreign currency as well as domestic local currency yield curves.
 
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Series: Working Paper No. 10/140
Subject(s): External borrowing | External financing | Capital inflows | International bond markets | International capital markets | Infrastructure | Low-income developing countries | Africa
Author's keyword(s): Credit Ratings | Debt | First-Time Issuers | Push and Pull Factors | Sovereign Bonds | Spreads | Sub-Saharan Africa
 
English  
    Published:   June 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010140   Pages:   21
    Price:   US$18.00
       
     
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