African countries raised the largest amount of debt from international markets ever this year. The amount has reached a record high of approximately $8 billion.

African countries are making a breakthrough on international capital markets. According to Moodys, they have issued up to $ 8 billion of sovereign bonds on the primary market since the beginning of the year, where they raised only $5.2 billion in 2010 and only $1.2 billion 10 years ago. This not only signals African countries’ interest in international debt markets but also investors’ positive stance on Africa. The biggest issuer this year is Egypt with $3.7 billion raised, followed by South Africa with $2 billion, Ghana and Nigeria both raising over $ 1 billion  and the big surprise coming from Rwanda, which raised $400 Million.

The strong investors’ interest in the region is supported by promising economic growth forecasts, which are seen to reach an average of 5% to 6% in the coming years. The monetary policy led by the United States has driven many investors to diversify their portfolio by seeking more attractive returns. The Rwandan bond issue offered a yield of 6,875%, Nigeria’s offered 6.625% and Ghana’s 8%.

Even though only 14 of the 54 African countries have issued securities denominated in foreign currencies, more countries should follow suit in the coming year: Angola, Cameroon, Kenya, Tanzania, Uganda and Mozambique. A few days ago, Kenya reported its intent to make its first international issuance in dollars for about $1.5 billion early 2014. This is considered by the Kenyan government as a means to improve the rating of the country and its risk level.

However, the other sources of external funding such as loans or bilateral trades are expected to remain the main sources of financing.

Sources: FT, October 8, 2013; Africa bond issues soar to record sums