Domestic Borrowing Often Safer Than Eurobonds, Says IMF’s Abebe Selassie
The Director of the African Department at the International Monetary Fund (IMF), Abebe Aemro Selassie, has expressed concern about the strong enthusiasm that often surrounds government Eurobond issuances, cautioning that the excitement can divert attention from the risks involved.
In an interview on Channel One TV’s The Point of View on Wednesday, January 21, Mr Selassie acknowledged that Eurobonds remain a widely used source of financing but argued that borrowing in local currency is generally a safer option.
He explained that domestic bonds allow governments to raise funds in their own currency, limiting exposure to foreign exchange risks when managed prudently, unlike Eurobonds which often attract disproportionate attention.
“I sometimes worry about the hype and spectacle that accompany Eurobond issuances. When governments issue domestic bonds, there are sound economic reasons for doing so because borrowing in one’s own currency is usually manageable if handled carefully. Yet every Eurobond issue tends to generate a lot of excitement,” he said.
Mr Selassie noted that the IMF routinely carries out detailed evaluations of countries’ economic policies and financing approaches, including debt sustainability assessments, to identify areas of vulnerability.
He pointed out that Ghana has been assessed as being at high risk of debt distress since around 2014, adding that the Fund has consistently highlighted these risks over the years.
“Ghana has been categorised as having a high risk of debt distress going back to about 2014, and we have been flagging these vulnerabilities since then,” he stated.
The IMF official stressed that Ghana’s debt situation cannot be blamed entirely on domestic policy choices, noting that changes in global economic conditions have also contributed to the challenges.
He further clarified that the IMF does not raise debt on behalf of countries, emphasising that borrowing decisions are ultimately the responsibility of sovereign governments.
“There is no basis for the claim that the IMF goes out to borrow on behalf of countries. If anything, we have often argued the opposite. Ultimately, these are sovereign decisions taken by national authorities,” Mr Selassie said.
