AfDB Launches Second Uganda Shilling Bond

cost geneva; font-size: small; line-height: 115%;”>The Shs 12.5 billion bond is opened for subscription until the May 27. It is the latest issuance under the Shs 125 billion Medium-Term Note (MTN) Programme originally established in mid-2012.

approved geneva;”>The MTN approach was adopted to allow the Bank to regularly tap into the Ugandan capital market, issuing various tranches, rather than standalone transactions thereby minimizing costs for its clients and reducing the lead time necessary to access the market.

The AfDB return to the Uganda market reflects local demand for additional debt instruments and the need for local currency financing to push infrastructure and other development projects.

Pierre Van Peteghem, the Bank Group Treasurer, heralds this issuance as just the beginning of his department’s push to avail more local currency to private sector clients.

“The Bank has recently approved an additional five African currencies including the Ghanaian Cedi and the Franc CFA for both West and Central African zones as official lending currencies of the Bank. This brings the total number of African currencies in which we can on-lend to clients to ten,” he said.


Peteghem added: “This will enable us to better respond to client needs, particularly with respect to mitigating foreign exchange risk posed by hard currency loans. We believe by directly issuing local currency bonds, we also play a key role in developing the local capital market.”

Olivier Eweck, Manager of African Currency Funding in the Treasury Department of AfDB said: “Arranged by African Alliance and executed as a tap sale on the original Uganda Shilling bond issued in July 2012, this most recent note will be linked to the new two-year bond that the Government of Uganda intends to launch on May 23, but will re-price every two years at 85 perecent of the weighted average yield to maturity on the latest Ugandan government bond benchmark.”

Similarly to the first tranche, this issuance will also be launched at sub-government levels.

“We expect a high demand from local and international investors, even higher than for last year’s first tranche,” added Eweck.

The first re-pricing exercise will take place in August 2014.

The AfDB plans to launch two new MTN local currency programmes in Nigeria and Zambia in the coming months. Since its first African currency loan in 1998, the Bank’s local currency loan portfolio totals the equivalent to over USD 2.4 billion.

The Bank is however keen to diversify its local currency portfolio across all African regions beyond the South African rand which now dominates the local currency loan book and is the multilateral lender’s third largest lending currency.

As part of the Local Currency Initiative established in 2006, the AfDB has received approvals to issue in the local capital markets of Tanzania, Ghana and Kenya, among other countries and hopes to enter many of these markets in the short to medium-term.

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