Ivory Coast drops eurobond sale plan as dollar strengthens

Ivory Coast abandoned plans to offer a Eurobond this year and is opting to raise debt in West Africa’s regional market as the stronger dollar makes selling offshore finance too expensive.

The world’s biggest cocoa producer is planning to issue as much as 550 billion CFA Francs ($938 million) on the local market before the end of the year, adding to a 150 billion francs sukuk bond sale earlier this month, Finance Minister Adama Kone said in an interview in Abidjan, the commercial capital, on Aug. 25. Ivory Coast issued $750 million of dollar-denominated debt in 2014 and another $1 billion last year.

“Our last Eurobond was just before the dollar started rising. Today, it is very expensive,” Kone said. “We will go offshore if we later notice that the regional market isn’t sufficiently liquid.” The U.S. currency has strengthened 7.4 percent against the euro, which is used as a peg for the franc, since the start of 2015 when Ivory Coast announced the sale of its previous Eurobond.

Ivory Coast wants to avoid debt rising beyond the current 41 percent of gross domestic product, Kone said. The country is maintaining its economic growth forecast of 9 percent for this year, despite a drop in cocoa production and security concerns following an al-Qaeda attack on a popular beach in which 19 people were killed in March. The budget deficit will rise to 3.8 percent of GDP this year from 3 percent in 2015 because of higher spending on security, infrastructure and education, he said.

The International Monetary Fund in July revised its growth projection to 8 percent from 8.5 percent as dry weather damaged agricultural production.

Cocoa Output

Cocoa production for the season to Sept. 30 will be around 1.7 million metric tons, Kone said. That’s about 100,000 tons less than the record crop last year, he said. Cocoa production has been hindered this season by the worst dry winds in thirty years, which damaged the crop quantity and quality.

The next harvest, which starts in October, may reach about 1.75 million tons as cocoa-growing areas have received sufficient rainfall since last month, Kone said. In July, the government forecast a 1.65 million ton harvest for next season, according to a person familiar with official data.

“We were expecting the rain to fall in May and June but it didn’t rain abundantly,” he said. “It’s now that the rains have set in. We are optimistic.”