Eurobond issue soon to boost local Investments?

In the wake of the announcements of successful predecessors Nigera and Kenya, now Ethiopia also plans to issue bonds, among them a debut Eurobond. This will have to happen only once Ethiopia has secured a credit rating but will not open its telecoms or banking sectors to foreigners as their revenues help fund infrastructure, the prime minister said today. The comments by Hailemariam Desalegn in an interview with Reuters will disappoint international investors hoping for a shift away from the state-led policies of former prime minister Meles Zenawi, who died last August. Ethiopia is now sub-Saharan Africa’s fifth biggest economy and one of the continent’s fastest growing. Foreign appetite for African bonds has been strong as investors scramble for yield. “One company is working on the rating process that will take some time,” Hailemariam said, when asked if Ethiopia planned a Eurobond.

Without giving a timeline, the prime minister said securing a rating was part of the process towards such an issue, adding that plans involved “not only a Eurobond but other bonds as well”. He said he would stick to a policy that has kept the telecoms monopoly in state hands and the banking sector – dominated by three state institutions – off limits to foreigners, as income or financing from those entities is being used to develop the country’s infrastructure. Revenues from Ethio Telecom were allocated to fund railway development.

“We engage ourselves in railway construction simply because we get revenues from telecoms,” he said, adding that Ethiopia had been able to finance about 20 000 km of new roads over the past eight years or so because state banks offered funding. He would not say when that might change but indicated that any such opening was years away, adding: “It depends on how fast we move making the basic infrastructure in the country.” Foreign direct investment in the financial year 2012/13 was “around US$ 2bn” and he expected it to be about US$ 2bn a year for both 2013/14 and 2014/15.

“That is the minimum that we get,” he said, adding that the building of new industrial zones could speed that up. “If we move very fast then we can attract even more.” The zones, now under construction, would offer free land with tax breaks and other benefits. The prime minister said textile firms, garment makers, leather goods producers and other companies had already invested in Ethiopia or were showing an interest.

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