In recent years, African governments have turned to Eurobonds as a way of funding deficiencies in their development budgets. Some of the countries include Kenya, Ivory Coast, Uganda, Zambia, Namibia, Gabon and Angola among others.
Money raised from Eurobonds has in some cases been diverted from its intended use to other non-development matters. Here are eight African countries that used their Eurobond money for the wrong reasons:
Note: A Eurobond is a debt instrument that is issued to another country that uses a foreign currency denomination. It is called Eurobond because it was first issued in Europe.
In 2007, Ghana became the first country in Sub-Saharan Africa to issue a Eurobond. The government however used the money to increasing salaries for its civil servants in the hope that it would raise enough revenue from cocoa, gold and oil exports to repay the debt. The prices collapsed and Ghana sought assistance from International Monetary Fund to repay the debt and stabilize her economy.
The Zambian government used money raised from a Eurobond on a range of activities that could not generate income and help in repaying the loans. Like Ghana, the money was used to pay civil servants salaries, which make up 52 percent of the nation’s annual budget. By-elections and creation of more districts are other avenues that the money was spent on.
In June 2014, the government raised US $2.21 billion from sovereign bond meant to fund different infrastructural projects. The government has been unable to detail the projects that were funded by Eurobond proceeds as requested by the opposition. About $750 million of the bond was used to pay civil servants and also run day to day activities of various ministries, while another $600 million was used to pay a syndicated loan.