Senegal: Project TER, International Finance 101, the International Bond Market & the $2 Billion question.
Having carefully followed and intently listened to the conversation and chatter around the financing of project TER, I must say I am very disappointed and astonished at the lack of financial Sophistication on the part of our leaders and frankly on the part of all involved including tv talking heads and other so-called self-proclaimed “big shot economists and finance experts” alike.
For over 2 weeks, I curated and listened to the experts take turn in pontificating on the type of financing appropriate for the project. Most of the conversation revolved around complains of excessive spending, “mal gouvernance”, whether or not the project is sustainable long term, who is in charge, who is not. Blah blah blah… total kabooki dance. No new plot. Just recycled viewpoints and slight variation on old tired talking points.
I kept hoping that someone will breakout and finally mention the public debt markets at the very least, as a viable alternative option to tap into to raise the funds needed to realize such a big (as big projects go for Senegal) project. But much to my dismay, not a single person mentioned or even alluded to it. Not a single soul. Not one. They all seem to think that banks are the only available source of funding for every endeavor when Nothing could be further from the truth. In fact, banks should have been the option of last resort for this type of project. They are ill suited for it.
Now, I do not know what anyone knows or does not but It seems to me that for a project of this magnitude (~ $2 Billion), it was financial malpractice to overlook the international bond market which can help with much better financing terms and debt refinancing options than a private French bank or financial entity/fund somewhere in the land of algae most likely teething on the verge of bankruptcy.
Accessible, Available and there for the taking.
The International Bond(Debt) Market is wide open to any country that meets certain borrowing criteria set forth by lenders. So Why borrow money the way private citizens do-as a personal loan? Why not issue foreign bonds to raise the money? Was anyone even aware of this as an option available to Senegal? This is the unanswered $2 Billion question
When Senegal, as a sovereign entity, decides to raise large capital to finance its biggest, most expensive project to date, it has a fiduciary duty to explore all of its available options including turning to the debt market to issue global bonds for better financial risk management. Global bonds are international bonds that are offered simultaneously in various capital markets including Europe, Asia, and America. These bonds may have a fixed or floating rate with maturities ranging from one to 30 years. Borrowing terms I am sure beat the current debt structure put together for the project.
Going forward Senegal should put on its big boy pants and join the big boy financial league to spruce up its public finances and lighten up its load and restructure its debt. For that it needs to bring in a cadre of experts (stay away from the IMF ones) with experience in international debt markets to help put together and submit “Bond RFPs”.
Ghana was first African country to do this. In March 2021, it turned to Eurobond to raise money to refinance its expensive power loans and restructure high risk debt. It did it again this past July when it raised $2 Billion to fund its social and environmental programs. I even dedicated an article to it. Ghana completely ditched the IMF and turned to the IDM for its financial needs. This seems to have helped the country’s financial and economic situation a lot. It should be used as a blueprint for other countries such as Senegal. Learning from what works should be the rule, not the exception.