How addressing debt overhangs of SSA sovereigns can spur growth

The G20 and Global Sovereign Debt Roundtable are currently addressing the urgent need to speed up the debt relief process and the restructuring of Sovereign debt, particularly in low-income and medium-income countries in Sub-Saharan Africa. This issue has taken center stage at the spring meetings, with key countries like Zambia and Ghana facing significant debt challenges. Wonuola Akanbi, the Head of Energy and Infrastructure Sales, Global Markets at Stanbic IBTC Bank, provided insights on the pressing matters at hand during a recent CNBC Africa interview. The key theme of the discussion revolves around finding quick and sustainable resolutions to the debt issues faced by countries like Ghana, which is striving to address its debt concerns to access a $3 billion IMF program. A crucial aspect of these discussions pertains to bilateral borrowings, with Ghana having a substantial $1.9 billion exposure to China. The outcome of negotiations with China will play a pivotal role in resolving Ghana's debt situation and determining its access to vital financial support. Key points highlighted include the impact of the debt relief process on Sub-Saharan African Eurobonds. Despite challenges in sustaining elevated debt levels in the region, countries like Angola, Nigeria, and Ghana have seen positive outcomes in the Eurobond space, driven by factors such as favorable oil prices and successful debt restructuring programs. The resolution of bilateral loans, particularly those with China, will be crucial in unlocking access to additional funds and fostering economic growth. Regarding the market outlook, Akanbi discussed expectations for the primary market auction and its potential impact on market sentiments. While anticipating a successful rollover of funds in the auction, factors such as liquidity shortages and central bank policies will influence yield movements. The injection of liquidity from various sources, including bond maturities and FAC inflows, is poised to drive market activities and potentially moderate yields in the near term. Looking ahead to the second quarter bond activity, Akanbi outlined expectations of robust bond auctions in the short term, supported by substantial liquidity inflows. However, the sustainability of issuance targets, such as the DMO's $7 trillion local borrowing target for the year, remains uncertain due to evolving market dynamics and government policies. Akanbi emphasized the need for strategic planning and proactive measures to address potential funding gaps and ensure the effective management of debt obligations. In conclusion, the corporate bond market is poised for increased activity, with a shift towards local bond issuances driven by changes in T-bill and government bond market dynamics. The evolving landscape underscores the importance of adaptability and strategic decision-making among corporates to navigate changing market conditions effectively. Akanbi's insights shed light on the challenges and opportunities facing Sub-Saharan Africa's debt landscape and highlight the critical role of international cooperation and financial institutions in supporting sustainable economic growth and development in the region.