Three WAEMU nations grapple with $14.5bn Eurobond repayment by 2048

Three WAEMU nations grapple with $14.5bn Eurobond repayment by 2048

Benin, Senegal, and Côte d’Ivoire have to repay $14.5 billion in Eurobonds by 2048, mostly in euros. Refinancing these bonds is difficult, given rising interest rates and the perception of high risk.

Three West African countries, Benin, Senegal, and Côte d’Ivoire, are due to repay a combined $14.5 billion in Eurobonds between October 1, 2023, and March 22, 2048, according to data compiled by Agence Umoa-Titres on the Refinitiv professional platform. The majority of this sum, $9.5 billion, is to be paid in euros.

However, they also have to repay $4.9 billion in US dollar bonds, and unlike their currency’s fixed parity with the euro, the value of dollar-denominated bonds can vary if the dollar exchange rate fluctuates. Three of these bonds, for a total of $1.9 billion, must be repaid before the end of July 2024.

Refinancing their debts might pose challenges for these countries. Despite positive economic prospects, investors view them as riskier and less lucrative compared to regions like the USA, Europe, or Asia, where interest rates are on the rise. Consequently, the gap between their borrowing rates and current bond yields is widening, reaching up to 5% for some.

Collectively, these nations had borrowed $18.5 billion internationally, aiming for lower interest rates than their local markets. However, the landscape shifted due to the Covid-19 crisis and global uncertainties. The US increased interest rates, prompting investors to exit riskier markets, including those considering debt cancellation.

A significant hurdle for these countries is that borrowed funds were often allocated to development projects or managing external debt. Now, they must undertake economic reforms to generate enough foreign exchange earnings for debt repayment.