Addis Ababa, Ethiopia (PANA) – Ethiopia, East Africa’s second largest economy, is on course for the issuance of a sovereign bond, marking the entry into the international financial markets as an alternative to foreign lenders.
A state media report Monday, said three banks, BNP Paribas, Deutsche Bank and JP Morgan, have been selected to arrange the bond issuance.
Ethiopia is expected to issue the sovereign Bond with a 10-year tenure, whose proceeds would be used to boost ongoing infrastructure developments.
Ethiopia is undertaking the construction of over 2,000-km of railway, linking the capital, Addis Ababa, to neighbouring Djibouti, and a metropolis transport system, which would require the importation of 41 locomotives.
The foray into the international bond market would allow foreign players an entry into the Ethiopian financial market. It also injects a new era of scrutiny into the country’s public debt and private debt scenario in addition to the need for extra-budget transparency.
Ethiopia’s efforts to enter the global financial markets got an earlier boost mid this year with Moody’s rating of B1 and Standard and Poor’s and Fitch Rating at B.
The Bond is expected to be issued by year-end or early 2015. Authorities expect the Eurobond to diversify Ethiopia’s source of financing.
The current account deficit has been widening with imports at US$8 billion while export earnings stood at US$3.1 billion in 2012/13 financial year.
Ethiopia expects earnings from future manufacturing sector exports to hit US$1.5 billion. The annual inflation dropped significantly to 8.1% in October from 8.7% in September.
