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Washing away original sin: vulnerability to crisis and the role of local currency bonds in Sub-Saharan Africa

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  • Essers, Dennis
  • Cassimon, Danny

Abstract

This paper starts from the concept of ‘original sin’ to demonstrate that the development of local currency bond markets remains a priority for Sub-Saharan African countries, both as a prevention mechanism against external shocks and to exploit growth-boosting investment opportunities. We present evidence suggesting that in Sub-Saharan Africa, as in other developing country regions, original sin (at least in its domestic form) is today less prevalent than it used to be. An increasing number of African governments now issue non-indexed local currency bonds with tenors of 10 years and more on a regular basis. This is not to say that all is well. African bond markets often lack liquidity, feature few corporate securities, and have a narrow investor base of commercial banks. Many more hurdles remain to be taken, by African countries themselves and the international community, if we are to further wash away original sin.

Suggested Citation

  • Essers, Dennis & Cassimon, Danny, 2012. "Washing away original sin: vulnerability to crisis and the role of local currency bonds in Sub-Saharan Africa," IOB Working Papers 2012.12, Universiteit Antwerpen, Institute of Development Policy (IOB).
  • Handle: RePEc:iob:wpaper:2012012
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    Cited by:

    1. Dennis Essers & Hans J. Blommestein & Danny Cassimon & Perla Ibarlucea Flores, 2016. "Local Currency Bond Market Development in Sub-Saharan Africa: A Stock-Taking Exercise and Analysis of Key Drivers," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(5), pages 1167-1194, May.
    2. 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.
    3. Henri Audigé, 2014. "Net flows to emerging markets’ funds and the U.S. monetary policy after the subprime crisis," EconomiX Working Papers 2014-23, University of Paris Nanterre, EconomiX.
    4. Essers, Dennis & Cassimon, Danny, 2013. "And what about Africa's original sins?," IOB Analyses & Policy Briefs 1, Universiteit Antwerpen, Institute of Development Policy (IOB).
    5. repec:nam:befdwp:3 is not listed on IDEAS
    6. Stephen Vajs, 2014. "Government debt issuance: issues for central banks," BIS Papers chapters,in: Bank for International Settlements (ed.), The role of central banks in macroeconomic and financial stability, volume 76, pages 29-46 Bank for International Settlements.

    More about this item

    Keywords

    original sin; vulnerability; local currency bonds; domestic debt; Sub-Saharan Africa;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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