Countries within sub-Saharan Africa could strengthen their ratings and stimulate gross domestic product growth by exploiting their increasing use of Eurobond issuances for initiatives fostering lasting growth, such as infrastructure, Standard & Poor’s (S&P) Ratings Services said on Tuesday.

Governments in sub-Saharan Africa were increasingly turning to international debt markets to raise funds, as it was currently cheaper for many African countries to issue debt on the international markets than domestically.

However, spending the proceeds on measures that fail to stimulate growth, such as subsidies or public sector wages, could effectively damage their credit quality, while injecting the funds into diversifying their economies or investing in infrastructure, roads or education projects would boost economic growth and ratings, the ratings agency stated.

South Africa was historically the only African country leveraging international bond markets, but the past two years have seen an acceleration of rated sub-Saharan countries tapping the market, with seven
sovereigns launching debut global debt issues totalling about $5-billion
since 2007.

“Over the past 12 months, we
have assigned issue ratings to three sub-Saharan African sovereigns’
international bond issues: the Republic of Zambia's $750-million bond; a
Republic of Angola-backed $1-billion bond issued through the special purpose
vehicle Northern Lights III; and the Republic of Rwanda's $400-million bond,” S&P commented.

S&P forecast that, in 2013, the 16 rated sub-Saharan African countries would borrow an equivalent of $56-billion – a 25% increase in long-term commercial debt
issuance compared with 2012.

“If borrowing from official lenders is included, we estimate overall long-term
borrowing at $70-billion in 2013,” the ratings agency added.

S&P projected that the total commercial debt stock of the sub-Saharan countries would reach an equivalent
 of $285-billion and concessional debt stock $355-billion by year-end.