Sovereign bond issues: Do African countries pay more to borrow?☆

Abstract

There is a new wave of external borrowing by African governments on private sovereign bond markets. The findings in this paper indicate that African economies pay higher-than-normal coupon rates on these markets; observed risk measures like agency ratings and debt to GDP ratios do not explain the deviation from the norm. We also find that countries in better financial standing tend to self-select into the private markets, such that their risk profiles cannot explain the high coupon rates. Further research steps and policy implications are discussed.