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OECD to offer Africa lessons in handling debt

Rich OECD countries and South Africa are setting up a training centre for African treasury officials to improve debt management on the poorest continent and deepen its nascent domestic bond markets. The initiative, which will be most clearly visible in a debt management training centre near Johannesburg, is meant to build on the debt relief granted to many states five years ago and ensure they do not fall into the same trap again.

It is also a recognition of the increasing tendency of African states to look to international markets for financing, and of foreigners to see investment opportunities in high-yielding domestic debt in frontier African economies.

Both developments make managing a country's debt a very complicated affair that, if not handled properly, can go badly wrong.

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"Debt managers from emerging market countries such as from Africa increasingly face challenges similar to those of their counterparts from advanced markets due to pressures from global finance," the Paris-based Organization for Economic Cooperation and Development said.

"Better debt public management and stronger local-currency government bond markets help to reduce the cost and risk of public debt and avoid a build-up of new unsustainable debt burdens in the post-debt relief stage."

The debt management centre, which will host seminars and training sessions bringing African and OECD officials together, should be up and running next month.

With the exception of South Africa, far and away sub-Sahara's most sophisticated economy and capital market, Ghana was the first country in the region to issue a dollar bond, with a 10-year $750-million (U.S.) issue in late 2007.

Gabon, Senegal, Congo Republic and Nigeria have all launched Eurobonds since then. The region's biggest Eurobond is Ivory Coast's $2.3-billion 2032 offering, the result of a repackaging of several existing defaulted loans.

Kenya, Uganda, Rwanda, Tanzania, Zambia and Angola have all expressed a desire to launch a Eurobond, although with varying degrees of credibility.

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