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

_IMF Working Papers, June 1, 2010_

## Source details

**Canonical URL:** [Beyond Aid: How Much Should African Countries Pay to Borrow?](https://www.imf.org/en/publications/wp/issues/2016/12/31/beyond-aid-how-much-should-african-countries-pay-to-borrow-23939)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/beyond-aid-how-much-should-african-countries-pay-to-borrow-23939/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/beyond-aid-how-much-should-african-countries-pay-to-borrow-23939/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/beyond-aid-how-much-should-african-countries-pay-to-borrow-23939/bundle-manifest.json)

## Bibliographic details
- Authors: Cheikh A. Gueye, Amadou N Sy
- Published: June 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455201235.001

---

### 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.

### Methodology (two-step approach)
- Step 1: Estimate the sovereign credit rating for a country considering borrowing externally.
- Step 2: Estimate the interest rate cost (sovereign yield) associated with the estimated credit rating.
- The resulting estimates support construction of foreign currency and domestic local currency yield curves.

### Applications and uses
- Assessing the costs and benefits of different financing options for countries entering international capital markets.
- Constructing yield curves in both foreign currency and domestic local currency for emerging and frontier markets.

### Policy-relevant implications
- Quantitative estimates of sovereign credit ratings and interest rate costs provide practical inputs for debt management decisions when countries contemplate first-time access to international capital markets.
- Constructed yield curves (foreign and domestic) facilitate comparison of financing costs across instruments and currencies, informing choices about external borrowing for infrastructure and other investments.

*IMF Working Paper by Cheikh A. Gueye and Amadou N Sy, "Beyond Aid: How Much Should African Countries Pay to Borrow?", June 1, 2010.*

---

## Content in this bundle

- **_wp10140**
  - [_wp10140 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp10140.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp10140 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp10140.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/beyond-aid-how-much-should-african-countries-pay-to-borrow-23939_