Magazine article African Business

Bond-Issue Surge Skips Africa

Magazine article African Business

Bond-Issue Surge Skips Africa

Article excerpt

Private investors poured a record amount of money into bond issues from developing countries in 1993, according to a World Bank report, although relatively little of the upturn involved African economies.

During the last quarter of the year, private financial sources invested a record $19.7bn in bond issues from developing countries, according to the latest issue of the World Bank quarterly Financial Flows and the Developing Countries.

The late surge brought the 1993 total to $57.7bn, more than double the $21.2bn raised in 1992 and far surpassing the $7.3bn figure for 1990.

Despite the dramatic leap in issues, the spread on bonds continued to narrow as new investors entered the market seeking to boost portfolio returns, the quarterly states. Average spreads on dollar-denominated issues declined to about 280 basis points, or 2.8%, over US Treasury instruments. The amount is substantially below the 340 basis points at the beginning of 1993.

"It's very encouraging that private-source financing is on the rise to developing countries," observes Punam Chuhan, author of the quarterly and an economist in the World Bank's International Economics Department. "In the 1980s, voluntary Bank lending to developing countries had practically dried up, and portfolio flows were also tiny. The major source of funding for the developing world came from official sources. But official finance is limited, which is why the recent surge in private capital flows is significant."

Private flows have exceeded official flows for the past two years. …

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