Should African countries that were granted debt relief by the G8 group of nations just a year ago be able to access the international debt markets?
With several sovereigns actively planning new international issuance as early as the end of this year, the question is becoming increasingly relevant.
Whether or not international issuance is permissible under the conditions attached to the debt forgiveness programme is of only secondary importance here, though. Bankers and investors are pragmatists. They also frequently have helpfully short memories. Few of them will care if governments do decide to issue hard-currency bonds as long as they can pick up a decent yield and achieve better diversification.
The core issue is more one of whether it makes sense for governments to focus on this strategy at the expense of developing their domestic capital markets. There is some talk that smaller sovereigns, which do not need to raise more than one or two hundred million dollars of capital each, should band together and issue debt jointly in international markets, perhaps under the auspices of an agency such as the African Development Bank.
But such volumes could be more than adequately absorbed by each country’s domestic investor base.