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

June 1, 2010

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Cheikh A. Gueye, and Amadou N Sy. Beyond Aid: How Much Should African Countries Pay to Borrow?, (USA: International Monetary Fund, 2010) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Bond yields, Credit ratings, Emerging and frontier financial markets, Sovereign bonds, Yield curve

Keywords: Cost of capital, Debt management, Emerging market, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/140
Stock No:

WPIEA2010140
ISBN:

9781455201235
ISSN:

1018-5941

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