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Beyond Aid; How Much Should African Countries Pay to Borrow?


  • Cheikh A. Gueye
  • Amadou N Sy


Post debt relief, the number of African countries considering accessing international capital markets, often to fund large infrastructure projects, is increasing. Potential risks of capital inflows are well known but the literature offers little help to estimate the cost of borrowing internationally for the first time. This paper proposes a two-step approach to estimate the sovereign credit rating and interest rate cost of a country considering borrowing externally. Estimates can be used to assess the costs and benefits of different financing options. The method can also be used to construct foreign currency as well as domestic local currency yield curves.

Suggested Citation

  • Cheikh A. Gueye & Amadou N Sy, 2010. "Beyond Aid; How Much Should African Countries Pay to Borrow?," IMF Working Papers 10/140, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/140

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    References listed on IDEAS

    1. Peter Rowland & José Luis Torres, 2004. "Determinants of Spread and Creditworthiness for Emerging Market Sovereign Debt:A Panel Data Study," Borradores de Economia 295, Banco de la Republica de Colombia.
    2. Sy, Amadou N. R., 2002. "Emerging market bond spreads and sovereign credit ratings: reconciling market views with economic fundamentals," Emerging Markets Review, Elsevier, vol. 3(4), pages 380-408, December.
    3. Lee, Suk Hun, 1993. "Are the credit ratings assigned by bankers based on the willingness of LDC borrowers to repay?," Journal of Development Economics, Elsevier, vol. 40(2), pages 349-359, April.
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    Cited by:

    1. Bevan, David L., 2012. "Aid, Fiscal Policy, Climate Change, and Growth," WIDER Working Paper Series 077, World Institute for Development Economic Research (UNU-WIDER).
    2. repec:unu:wpaper:wp2012-77 is not listed on IDEAS
    3. Danny Cassimon & Dennis Essers & Karel Verbeke, 2015. "What to do after the clean slate? Post-relief public debt sustainability and management," BeFinD Working Papers 0103, University of Namur, Department of Economics.
    4. Ulrich Volz & Dafe Florence & Dennis Essers, 2017. "Localising Sovereign Debt: The Rise of Local Currency Bond Markets in Sub-Saharan Africa," Working Papers 202, Department of Economics, SOAS, University of London, UK.
    5. repec:nam:befdwp:3 is not listed on IDEAS
    6. Andrea Presbitero & Dhaneshwar Ghura & Olumuyiwa S Adedeji & Lamin Njie, 2015. "International Sovereign Bonds by Emerging Markets and Developing Economies; Drivers of Issuance and Spreads," IMF Working Papers 15/275, International Monetary Fund.
    7. Edward F Buffie & Michele Andreolli & Bin Grace Li & Luis-Felipe Zanna, 2016. "Macroeconomic Dimensions of Public-Private Partnerships," IMF Working Papers 16/78, International Monetary Fund.


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