Africa’s Eurobond issues questioned

African Eurobond issuers face more scrutiny in the wake of questions about the true extent of the debt loads of Zambia and the Republic of Congo.

Few investors expect the situation in either nation to be as bad as that of Mozambique, where the discovery of hidden loans two years ago triggered a financial crisis and sovereign default.

Still, many are querying whether their external liabilities are greater than public figures suggest.

Zambia denied on Friday it is hiding debt and showed budget documents detailing borrowing. The Republic of Congo also said it is not concealing debt.

The development may complicate funding plans for African governments and companies as rising geopolitical tensions in the Middle East and Russia and a tightening of monetary policy in the US make conditions tougher for emerging-market borrowers and prompt investors to be more scrupulous.

“In a rising tide, all boats are lifted,” said Ronak Gopaldas, a London-based analyst at Signal Risk, which advises companies in Africa. “But when the cycle turns, that is when countries with ‘bad politics and bad economics’ are exposed. Investors will scratch below the surface more.”