Côte d’Ivoire: An Example to Emulate
Despite socio-political instability this West African country has made use of bond sales to finance parts of its budgets since 2002.
In 2002, the Republic of Côte d’Ivoire issued government bonds for a three-year period (2002-2005) on the national and international markets to raise FCFA 30 billion at an interest rate of 7 per cent. The state finally raised FCFA 63,978,330,000. In 2003, another bond sale process was launched with the issuance of government bonds at an annual interest rate of 6,50 per cent for the 2003-2006 period to raise FCFA 30 billion but finally raised FCFA 40,403,329,000 despite social and political unrest that started on September 19, 2002. Both bonds were reportedly repaid by the state in 2005 and 2006, respectively. The quest for resources to implement its 2005 budget obliged Côte d’Ivoire to, once more, issue bonds for sale on the international market to raise FCFA 40 billion but finally got subscriptions for FCFA 86,133,610,000. The country’s economic potential and credibility accounted for the positive response from investors.
In Cameroon, the Presidential Decree of September 6, 2010 instructed the Minister of Finance to raise the sum of FCFA 200 billion through the sale of government bonds at the Douala Stock Exchange, DSX, to fund some ongoing development projects earmarked under the 2010 budget. That could have been perceived by many as unusual and even unjustified. In reality, Cameroon has just made use of a budget policy adjustment mechanism that had already been adopted by other countries to borrow money from economic operators and sustain the execution of an ongoing budget.
Coincidentally, on September 7, 2010, the President of the European Commission, José Manuel Barroso, called on the European Union member countries to consider using government bonds to speed up the construction of infrastructure in Europe.
Back on the African continent, Gabon recently raised FCFA 85,5 billion, close to its FCFA 100 billion target through a bond sale exercise that spread out to economic operators in the CEMAC zone. Other examples include Senegal, Ghana and the Republic of South Africa. South Africa plans to raise more than FCFA 2,600 billion through bond lending.
George MBELLA
