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

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  • Cheikh A. Gueye
  • Mr. Amadou N Sy

Abstract

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.

Suggested Citation

  • Cheikh A. Gueye & Mr. Amadou N Sy, 2010. "Beyond Aid: How Much Should African Countries Pay to Borrow?," IMF Working Papers 2010/140, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/140
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    1. repec:unu:wpaper:wp2012-77 is not listed on IDEAS
    2. Danny Cassimon & Dennis Essers & Karel Verbeke, 2015. "What to do after the clean slate? Post-relief public debt sustainability and management," BeFinD Working Papers 0103, University of Namur, Department of Economics.
    3. Florence Dafe & Dennis Essers & Ulrich Volz, 2018. "Localising sovereign debt: The rise of local currency bond markets in sub‐Saharan Africa," The World Economy, Wiley Blackwell, vol. 41(12), pages 3317-3344, December.
    4. Mr. Andrew Berg & Mr. Rafael A Portillo & Mr. Edward F Buffie & Ms. Catherine A Pattillo & Luis-Felipe Zanna, 2012. "Public Investment, Growth, and Debt Sustainability: Putting together the Pieces," IMF Working Papers 2012/144, International Monetary Fund.
    5. Christian Senga & Danny Cassimon & Dennis Essers, 2018. "Sub-Saharan African Eurobond yields: What really matters beyond global factors?," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 8(1), pages 49-62.
    6. Salifou Issoufou & Mr. Edward F Buffie & Mouhamadou Bamba Diop & Kalidou Thiaw, 2014. "Efficient Energy Investment and Fiscal Adjustment in Senegal," IMF Working Papers 2014/044, International Monetary Fund.
    7. Gurara, Daniel & Presbitero, Andrea & Sarmiento, Miguel, 2020. "Borrowing costs and the role of multilateral development banks: Evidence from cross-border syndicated bank lending," Journal of International Money and Finance, Elsevier, vol. 100(C).
    8. International Monetary Fund, 2012. "Burkina Faso: Staff Report for the 2011 Article IV Consultation and the Third Review Under the Extended Credit Facility: Staff Report; Staff Supplement; Public Information Notice and Press Release on ," IMF Staff Country Reports 2012/158, International Monetary Fund.
    9. Bevan, David L., 2012. "Aid, Fiscal Policy, Climate Change, and Growth," WIDER Working Paper Series 077, World Institute for Development Economic Research (UNU-WIDER).
    10. Isabel Ortiz & Jingqing Chai & Matthew Cummins, 2011. "Identifying Fiscal Space:Options for Social and Economic Development for Children and Poor Households in 184 Countries," Working papers 1108, UNICEF,Division of Policy and Strategy.
    11. repec:nam:befdwp:3 is not listed on IDEAS
    12. Strong, Christine & Yayi, Constant L., 2023. "The political affiliation of central bankers and government debt: Evidence from Africa," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 603-620.
    13. Mr. Andrea F Presbitero & Mr. Dhaneshwar Ghura & Mr. Olumuyiwa S Adedeji & Lamin Njie, 2015. "International Sovereign Bonds by Emerging Markets and Developing Economies: Drivers of Issuance and Spreads," IMF Working Papers 2015/275, International Monetary Fund.
    14. Grace Li, 2018. "Investing in Public Infrastructure: Roads or Schools?," 2018 Meeting Papers 338, Society for Economic Dynamics.
    15. Strong, Christine Olivia, 2021. "Political influence, central bank independence and inflation in Africa: A comparative analysis," European Journal of Political Economy, Elsevier, vol. 69(C).
    16. Mr. Edward F Buffie & Michele Andreolli & Ms. Grace B Li & Luis-Felipe Zanna, 2016. "Macroeconomic Dimensions of Public-Private Partnerships," IMF Working Papers 2016/078, International Monetary Fund.
    17. David L. Bevan, 2012. "Aid, Fiscal Policy, Climate Change, and Growth," WIDER Working Paper Series wp-2012-077, World Institute for Development Economic Research (UNU-WIDER).

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