Eurobonds are debt instruments issued by a country in a currency different from its own. Eurobonds have risen to prominence in Africa because they have opened a window for governments to diversify their funding sources from traditional concessionary loans offered by the International Monetary Fund (IMF) and foreign aid, both of which are declining. In addition, multilateral loans were becoming unpopular because they set strict conditions about austerity which are designed for governments to reduce spending.
A bond functions as a loan in which an investor gives a borrowing entity an amount of money for a specific period of time in exchange for periodic interest payments. South Africa issued the first African bond in 1995. To date, 21 African countries have issued Eurobonds worth a combined total of an estimated US$155 billion on international bond markets. Institutional investors from Europe and the US buy these instruments. Misheck Mutize, an expert on Africa sovereign debt, explains why the system isn’t working in favour of African countries.
