Following the decision to access the international bond market, the Ethiopian government selected the Export-Import (EXIM) Bank of America, Deutsche Bank and Barclays PLC to carry out the bond trade on its behalf, credible sources disclosed to The Reporter.
The Minister of Finance and Economic Development, Sufian Ahmed, announced to the local media two weeks ago that Ethiopia is preparing to dip into the international bond market by floating ten-year sovereign bonds before the end of this year. On the occasion, Sufian also noted that the treasury is looking for experienced international financial institutions to represent it in the bond market. According to sources close to matter, an American, German and British banks – EXIM Bank of America, Deutsche and Barclays – are the final three named by the ministry to do the job. There are many international treasuries which represent themselves in the international bond market. But, navigating the complex markets and reading the varying interest is not an easy task to do, according to pundits. And hence, the role of agent banks in conducting the money market affairs is quite significant.
With the Growth and Transformation Plan II in the pipeline, authorities are increasingly being pressed by the massive financial requirement of the mammoth infrastructure projects that they plan to execute. Thus far, the government have had access to the foreign finances both from the bilateral and multilateral sources on basis of concessions. Nevertheless, some commercial loan agreements were also agreed to by the Ethiopian government and government-owned enterprises. Now, Ethiopia is on the final verge of accessing foreign financing by issuing formal ten-year maturity bonds.
In preparation for the international bond market, the Ethiopian government has started by shopping for internationally accepted credit worthiness assessment which was later done by three internationally known credit raters – Moody’s, Standard and Poors (S&P) and Fitch. Moody’s was one agency that showed more optimism about Ethiopia’s credit worthiness with an assigned rating of “B1” an equivalent of a “B+” rating as per the symbolization of S&P and Fitch. The last two were not so bullish and rated Ethiopia only “B”; a notch lower than Moody’s rating. At that time, many expected the Ethiopian government to go to the bond market immediately encouraged by the favorable investment rating. Finance minister carefully denounced the existence of any plan to do so in near future. So, it was not until before two weeks that this decision was reversed.
According to Sufian, issuance of sovereign bond will help augmenting financing sources to country in addition to re-branding the nations to the international community. In relation to this, there are some who express worry about the effect of issuing a bond to the already controversial foreign debt stock of the nation. According to the international Monetary Fund (IMF), mounting external credit accessed by the State-owned Enterprises (SoEs) in Ethiopia poses a threat to overall public debt sector. Meanwhile, the authorities are convinced that IMF’s fear is entirely unfounded since it emanates from a wrong assumption that SoEs debt level are part and parcel of the overall government debt stock.
[TheReporterEthiopia]