BONDS ARE HOT
The Bond Party is getting exciting and African countries are eager not to be outdone. In a previous post, I mentioned Uganda was flirting with an international issuance, and the whispers have since grown louder. Rwanda is planning a second helping because it desires to fill funding gaps for various infrastructure projects. Bonds are looking so sexy, even municipals want a piece.
KCCA announced it was mulling the idea of listing debt on the capital markets to source long term funding for some of its projects. The city of Kigali wants one too. That is all well and good, but those of us with extensive knowledge of the bible enough to quote from it, (paraphrased) ‘with great ability/gifts, comes great responsibility’. In other words, does an increase in debt uptake ensure prudential public financial management? Slippage through corruption and inefficiencies can impede repayment capabilities and throw borrowing institutions into a tailspin where rising interest expenses with no corresponding revenues from projects for which funds were intended give cause for legitimate concern.
I don’t suppose financial markets are equivalent to technology where lagging countries have managed to leapfrog entire stages of innovation. Essentially, my urge is that we tread lightly as far as appetite for bonds is concerned. We are conspicuous novices in these matters.
Editor’s Note: The title was an inadequate primer to draw the uninterested public’s attention to an archaic analysis on economics that nonetheless has real ramifications for their well being.
I believe soliciting public funding might get the kampala inhabitants more interested in the work of KCCA. KCCA will oblige and account on the otherside. Clearly we have realised over the past decades that Kampala’s solution isn’t political, for the short time we have hard technocrats at the helm, the results have been extremely courageous. Probably we should run it as a company, a public company.