Sustainability of lending diversification of sub-Saharan African low-income countries

Souaré Ismaila, Wane Abdrahmane, Sene Babacar, Ndoye Marème. 2024. Sustainability of lending diversification of sub-Saharan African low-income countries. International Review of Economics and Finance, 96:103600, 15 p.

Résumé : The momentum in sub-Saharan low-income countries is leading to diversifying their funding sources to cover large infrastructure expenditures. This situation meets the expectations of international investors who are still willing to explore new opportunities. Recent access to the Eurobond market by these new players has resulted in the growing substitution of traditional concessional loans by market ones in countries with low-debt portfolios. Thus, a new sustainability approach is required to include risk premiums and potentially versatile investor behaviors. First, we use a theoretical model to show that in a context of low international interest rates, debtor countries can continue to stabilize their level of debt either through budget deficit, if it remains below a given sustainability threshold, or through budget surplus in a downturn context (high-interest rates and spreads). Second, the versatile behavior of investors could be challenging. Third, global liquidity greatly influences the debt dynamics of SSA countries so it matters more for bond spreads than domestic factors. As our empirical study shows that the current debt situation of sub-Saharan African low-income countries increasingly involved in the Eurobond market remains under control. To avoid the worst-case scenario, strong institutions should be a priority, along with appropriate management tools and methods of debt monitoring to cope with all potential vulnerability caused by undesirable side effects of such unstable behaviors.

Mots-clés Agrovoc : durabilité, dette publique, financement, diversification, dette extérieure

Mots-clés géographiques Agrovoc : Sénégal, Afrique au sud du Sahara, Afrique du Sud, Ghana

Mots-clés libres : Eurobonds, Sovereign debt, Sustainability, Sub-Saharan Africa

Auteurs et affiliations

• Souaré Ismaila, UCAD (SEN)
• Wane Abdrahmane, CIRAD-ES-UMR SELMET (CIV) ORCID: 0000-0001-5081-3788
• Sene Babacar, UCAD (SEN) - auteur correspondant
• Ndoye Marème, UCAD (SEN)

Source : Cirad-Agritrop (https://agritrop.cirad.fr/611290/)

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