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African governments have developed a taste for eurobonds; why it's dangerous

Discussion in 'News' started by sharon onyango, Feb 20, 2022.

  1. sharon onyango

    sharon onyango New Member

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    Eurobonds are international bonds issues by a country in a foreign currency, usually in US dollars and euros. They are borrowed in commercial terms. The interest rates, term of bond and coupon payments are determined by market conditions because of poor credit ratings and perceptions of high risk. African bonds are classified as high yields. They're risky but they offer high returns. Investors are scrambling for Africa's high yield bonds. Eurobonds are costly for government since they are pilling on debt without evaluating the exchange rate risks and the real costs of repaying the debts. In my view, this continuous borrowing is unsustainable. It will be irresponsible to accumulate unsustainable debt for short-term gains to be repaid by future generations.
     

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