Afreximbank report shows hard currency bond issuances by African countries plummet $6 billion in 2022

A latest report by the African Export-Import Bank (Afreximbank) has shown that hard currency bond issuances by African countries plummeted to US$6 billion in 2022.

The report titled “Africa’s 2023 Growth Prospects: Securing Growth Resilience in a Polycrisis World,” sheds light on the formidable challenges facing emerging markets and developing economies amidst tightened global financial conditions.

The report unveils a broader trend where the currencies of many developing nations depreciated against the United States (U.S) dollar in 2022, exacerbating concerns around inflationary pressures.

The devaluation of local currencies serves as a double-edged sword, compounding inflationary challenges and further dampening economic growth prospects.

“As the cost of imports rises, businesses face increased production costs, and consumers bear the brunt of higher prices for goods and services. This decline was striking, with bond issuances plummeting from around US$20 billion in 2021 to a mere US$6 billion in 2022.

“This dramatic reduction in sovereign bond activity limits access to international capital markets and constrains these economies’ ability to fund development projects and address critical infrastructure needs,” the report indicated.

Afreximbank’s report signals the urgent need for policymakers in emerging markets to address the vulnerabilities exposed by tightened global financial conditions. Enhancing resilience and fortifying economic structures against capital flow volatility and currency depreciation should be key priorities.

“Governments and central banks must implement proactive measures to attract and retain foreign direct investment, while also ensuring effective management of fiscal policies to safeguard against inflationary pressures,” the report stated.

The report also underscored the formidable challenges faced by emerging markets and developing economies amid tightened global financial conditions.

The vulnerabilities arising from capital flow volatility and depreciating currencies necessitate proactive and strategic measures to ensure sustainable growth and resilience.

“By implementing robust policies and structural reforms, these economies can navigate the complex financial landscape and position themselves for long-term success in an ever-changing global economy.

“Furthermore, fostering domestic industries and diversifying export bases can help mitigate the risks associated with heavy reliance on imports and volatile international markets. Governments need to promote a conducive business environment, supporting entrepreneurship and innovation, while also strengthening institutions to combat corruption and bolster investor confidence,” according to the report.

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