I

AF
R

A
E

ELOPME
D EV
NT

AF
R

F

PE
ME
NT

PE
ME
NT

BANQU

I

AF
R

A

N
CA

D
UN

OP

INE DE DÉVE
LO
CA

S
ND
FO

ICA
EL
IN DE DÉV

I
FR

NT
ME

S
ND
FO

AF
R

F

E
PP

E

ELOPME
D EV
NT

D
UN

N
CA

NT
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BANQU

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LO
CA
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FR

ICA
EL
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AfricAn Development BAnk Group

African fixed income andDerivatives Guidebook

ETB

mAY 2010

African Fixed Income andDerivatives Guidebook

Table of Contentsiii

Table of Contents
List of Abbreviations���������������������������������� iv
Foreword����������������������������������������������������� vii
Acknowledgements���������������������������������� viii

Madagascar�������������������������������������������������������������������89
Malawi �������������������������������������������������������������������������93
Mauritania���������������������������������������������������������������������97
Mauritius���������������������������������������������������������������������101
Morocco ���������������������������������������������������������������������107
Mozambique���������������������������������������������������������������113

Country Guides����������������������������������������������1
Namibia�����������������������������������������������������������������������117
Nigeria�������������������������������������������������������������������������121
Algeria�����������������������������������������������������������������������������3
Angola�����������������������������������������������������������������������������7
Botswana�����������������������������������������������������������������������11
Burundi�������������������������������������������������������������������������17
Cape Verde �������������������������������������������������������������������21
Central Africa Economic and Monetary Community �24
Comoros �����������������������������������������������������������������������31
Democratic Republic of Congo�������������������������������������35
Djibouti�������������������������������������������������������������������������39
Egypt�����������������������������������������������������������������������������43
Eritrea���������������������������������������������������������������������������49
Ethiopia�������������������������������������������������������������������������53

Rwanda�����������������������������������������������������������������������127
Sao Tome e Principe���������������������������������������������������131
Seychelles�������������������������������������������������������������������133
Sierra Leone ���������������������������������������������������������������137
Somalia�����������������������������������������������������������������������141
South Africa ���������������������������������������������������������������145
Sudan �������������������������������������������������������������������������153
Swaziland�������������������������������������������������������������������157
Tanzania���������������������������������������������������������������������161
Tunisia�������������������������������������������������������������������������167
Uganda �����������������������������������������������������������������������173
West African Economic and Monetary Union�����������178

The Gambia�������������������������������������������������������������������76
Ghana ���������������������������������������������������������������������������61
Guinea���������������������������������������������������������������������������67
Kenya ���������������������������������������������������������������������������71
Lesotho�������������������������������������������������������������������������77
Liberia���������������������������������������������������������������������������81
Libya�����������������������������������������������������������������������������85

Zambia �����������������������������������������������������������������������183
Zimbabwe�������������������������������������������������������������������189

iv

List of Abbreviations

List of Abbreviations
ADB
ADF
AfDB
AGOA
ALBI
AOA
APSB
ATS
Avg
BAI
BCC
BCEAO
BCM
BCV
BDM
BEAC
BESA
BIF
bn
BNA
BoA
BOAD
BoB
BoBC
BOG
BOS
BOT
BOU
BOZ
BPS
BRB
BRVM
BSE
BTA
BTC
BVM
BVMAC
BWP
CAD
CAR
CASE
CBB
CBG
CBN
CBK
CD
CDF

Asian Development Bank
African Development Fund
African Development Bank
African Growth and Opportunity Act
All Bond Index
Angola Kwanza
Association Professionnelle des Sociétés deBourses
Automatic Trading System
Average
British American Insurance
Banque Centrale du Congo
Banque Centrale des États de l’Afrique del’OuestBanque Centrale de Madagascar
Banco de Cabo Verde
Banco de MozambiqueBanque des Etats de l’Afrique Centrale
Bond Exchange of South Africa
Burundi Franc
BillionBanco Nacional de Angola
Bank of Algeria
Banque Ouest Africaine de Développement
Bank of Botswana
Bank of Botswana Certificate
Bank of Ghana
Bank of Sudan
Bank of Tanzania
Bank of Uganda
Bank of Zambia
Basis Points
Banque de la Republique du Burundi
Bourse Régionale des Valeurs Mobilières
Botswana Stock Exchange
Bons du Trésor Assimilables
Bons du Trésor Cessibles
Bolsa de Valores de Mozambique
Bourse des Valeurs Mobilières d’Afrique Centrale
Botswana Pula
Cash Against Delivery
Central African Republic
Cairo and Alexandria Stock Exchange
Central Bank Bills
Central Bank of Gambia
Central Bank of Nigeria
Central Bank of Kenya
Certificate of Deposit
Congolese Franc

CEMAC

Communauté Économique et Monétaire del’Afrique Centrale
CFA
Franc de la Communauté Financière del’Afrique
CIC
Central Bank Igarah Certificate
CIMA
Conférence Internationale des Marches d’Assurance
CIPRES
Conférence Interafricaine de la PrevoyanceSocialeCMA
Common Monetary Area
CMC
Council of Money and Credit
CIMA
Conférence Internationale des Marches d’Assurance
CNAS
Caisse Nationale d’Assurance Sociale
CNR
Caisse Nationale des Retraites
COBAC
Commission Bancaire de l’Afrique Centrale
COMESA Common Market of Eastern and Southern
AfricaCOSOBCommission d’Organisation et de Surveillancedes Opérations de Bourse
COSUMAF Commission de Surveillance du Marché Financier de l’Afrique Centrale
CP
Commercial Paper
CPI
Consumer Price Index
CREPMF
Conseil Régional de l’Epargne Publique et desMarchés Financiers
CSD
Central Securities Depository
CSE
Casablanca Stock Exchange
CVE
Cape Verde Escudo
DAA
Deposit Auction Arrangement
DAP
Delivery Against Payment
DC/BR
Dépositaire Central/Banque de Règlement
DFI
Development Finance Institution
DJF
Djibouti Franc
DOT
Algerian Direction of Trade
DPCF
Debt Participation Capital Fund
DRC
Democratic Republic of Congo
DSE
Dar es Salaam Stock Exchange
DVP
Delivery Versus Payment
DZD
Algerian Dinar
EASRA
East African Securities Regulatory Authorities
EGP
Egyptian Pound
EIB
European Investment Bank
EPZ
Export Processing Zone
ERN
Eritrean Nakfa
ESAF
Enhanced Structural Adjustment Facility
ETB
Ethiopian Birr
EUR
EuroEURIBOR Euro Interbank Offered Rate
FDI
Foreign Direct Investment
FGN
Federal Government of Nigeria

List of Abbreviations

FI
FMC
FMO
FRA
FSC
FSRCC
FTA
FX
GBOT
GDP
GHS
GNF
GoK
GOVI
HDI
HIPC
IDA
IDB
IFC
IMF
IPO
IRS
ISIN
JIBAR
JPY
JSE
KES
KfW
KIBOR
LIBOR
LLDC
LRD
LSL
LuSE
LYD
MACSS
MAD
MAIBOR
MDB
MDRI
MGA
MMIS
mn
MPC
MRO
MUR
MWK
MZM

Financial Institution
Financial Markets Commission
The Netherlands Development Finance Company
Forward Rate Agreement
Financial Services Commission
Financial Services Regulation Coordination
Committee
Free Trade Agreement
Foreign Exchange
Global Board of Trade Ltd
Gross Domestic ProductGhanaian Cedi
Guinean Franc
Government of Kenya
Government Bond Index
Human Development Index
Heavily Indebted Poor Country
International Development Association
Inter-Dealer Broker
International Finance Corporation
International Monetary Fund
Initial Public Offering
Internally Registered Stock
International Securities Identification Number
Johannesburg Interbank Agreed Rate
Japanese Yen
Johannesburg Stock Exchange
Kenyan Shilling
Kreditanstalt für Wiederaufbau
Kampala Interbank Offered Rate
London Interbank Offered Rate
Landlocked Developing Country
Liberian Dollar
Lesotho Loti
Lusaka Stock Exchange
Libyan Dinar
Mauritius Automated Clearing and Settlement
SystemMoroccan Dirham
Maputo Interbank Offered Rate
Multilateral Development Bank
Multilateral Debt Relief Initiative
Malagasy Ariary
Money Market Internet System
Millions
Monetary Policy Committee
Mauritanian Ouguiya
Mauritian Rupee
Malawi Kwacha
Mozambique Meticalv

NAICOMNBE
NBFIRA
NCDS
NDF
NGN
NGO
NIBOR
NSE
NSX
NT
OHADA
OMO
OTC
OTS
OTHI
PIBO
PRGF
RAP
RBZ
RMC
RTGS
RWF
SAFEX
SARB
SCR
SDD
SDR
SGI
SGVB
SIBA
SICIL
SICOM
SIDS
SIV
SLL
SME
SOS
SRO
SSX
STD
STRIPSSVT
SZL
T-billTBC
TCMF

National Insurance Commission
National Bank of Ethiopia
Non-Bank Financial Institutions Authority
Negotiable Certificate of deposit
Non-Deliverable Forward
Nigerian Naira
Non-Governmental Organization
Nigerian Interbank Offered Rate
Nairobi Stock Exchange
Namibian Stock Exchange
National Treasury
L’Organisation pour l’Harmonisation en Afrique du Droit des Affaires
Open Market Operations
Over-The-Counter
Off-shore Trade Settlement
Other Bond Index
Public Infrastructure Bond Offer
Poverty Reduction and Growth Facility
Receipt Against Payment
Reserve Bank of Zimbabwe
Regional Member Country
Real Time Gross Settlement
Rwandan FrancSouth African Futures ExchangeSouth African Reserve Bank
Seychelles Rupee
Sudanese Dinar
Special Drawing Right
Sociétés de Gestion et d’Intermédiation
Société de Gestion de la Bourse des Valeurs
Seychelles International Business Authority
Sistema Integrado de Compensacao Interbancaria e de Liquidacao
State Insurance Company of Mauritius
Small Island Developing State
Structured Investment Vehicle
Sierra Leonean Leone
Small and Medium Enterprises
Somali Shilling
Self-Regulatory Organization
Swaziland Stock Exchange
Sao Tome e Principe Dobra
Separate Trading of Registered Interest andPrincipal of Securities
Spécialistes en Valeur de Trésor
Swaziland Lilangeni
Treasury Bill
Titulos do Banco Central
Titulos Consolidatos de Mobilisação Financieravi

List of Abbreviations

TND
TZS
UEMOA
UGX
UN
USD
USE
WAEMU
WAIR
WAMU
WATBR
XAF
XOF
ZIPSS
ZMK
ZWD

Tunisian Dinar
Tanzanian Shilling
Union Économique et Monétaire Ouest Africaine
Uganda Shilling
United Nations
United States Dollar
Uganda Stock ExchangeWest African Economic and Monetary Union
Weighted Average Interbank Rate
West African Monetary Union
Weighted Average Treasury Bills Rate
CFA Franc (Central African Region)
CFA Franc (West African Region)
Zambian Inter-bank Payment and Settlement
SystemZambian Kwacha
Zimbabwe Dollar

Forewordvii

Foreword
It gives us great pleasure to present the second edition of the African Fixed Income and Derivatives Guidebook, oneof several initiatives undertaken by the African Development Bank to disseminate information on developments in
African financial markets.
Three years after the first edition and in the aftermath of the worst global economic and financial crisis in decades,
we are pleased to report on the status of the African debt capital markets.
We believe this publication captures the features of the debt money and capital markets that are of most interest toinvestors, issuers, policy makers, other capital market participants, academics and researchers. It surveys the development of existing infrastructure in fixed income, foreign exchange and derivatives markets, where applicable. It also
provides key information on market participation of domestic and international players and an overview of the current
tax policy relating to fixed income instruments.
There are a number of positive observations that this edition brings to light as compared to the first edition publishedin May 2007. Treasury yield curves have been extended from bills into medium and long-term bonds, issuance sizes
have increased, investments have been made in settlement and clearing infrastructure and Delivery Versus Payment
has been achieved in many markets. The investor base has increased in diversity from dominance of the banking sector to non-bank investors, liquidity in the secondary market for government securities has continued to improve, andregulations remain largely supportive of the participation of foreign investors in local markets.
We are confident that the domestic money and capital markets will play a greater role in the mobilization of resources
and financing of infrastructure and other socially desirable projects in Africa. Indeed, pre-crisis levels of GDP growth
made it imperative that domestic financial markets become the source of preferred financing for long-term projects. The
corporate issuance category of the primary market has perhaps the biggest potential for growth in the coming years.
Commercial paper and corporate bond issues continue to grow, thereby increasing asset diversity and market depth.
These have been well supported by improved liquidity in the government securities markets as pricing benchmarks.
Innovative transactions such as infrastructure bonds and issues by public-private-partnerships entities have been useful in financing infrastructure projects.
Several markets reported a rise in yields and depreciation of local currencies during the peak of the global financial
crisis as investors reduced their exposure to Africa. A recent gradual return to the African markets has been reported.
This further demonstrates that African markets have developed and continue to promote an environment conducive
to foreign investor participation. These flows will complement the domestic savings required to deliver the necessary
capital to finance Africa‘s huge funding requirements.
The information provided in this guidebook is compiled by the African Development Bank in collaboration with several
organizations including Central Banks, Ministries of Finance, Stock Exchanges, and financial institutions active on thecontinent without which contribution this publication would not have been possible.

Thierry de Longuemar

Pierre Van Peteghem

Vice President, FinanceGroup Treasurer

viii

Overview

Overview
This guidebook is intended to provide a first window into each African fixed income market and covers the cornerstones that are often analyzed by investors, policy makers, academics and researchers. This publication reviews all the
53 African markets with the West Africa Economic and Monetary Union (WAEMU) and the Central Africa Economicand Monetary Community (CEMAC) regions each represented as single markets.
For each market, we discuss the pillars that support the development of deep and vibrant debt capital markets. These
include: the monetary policy framework and efficiency of the money market, a sustainable Government debt issuanceand management program, a variety of market intermediaries, a broad spectrum of investor classes, as well as market
infrastructure that includes prudent regulation and efficient clearing and settlement systems.
Monetary Policy and Money Market
Fixed income markets traditionally get their roots from the monetary policy framework and the money market. The
overriding distinction of fixed income assets is their fixed return to investment for specified interest periods. As aconsequence, investors in these assets look at, amongst others, the monetary policy framework in order to take a viewon the required nominal return since the real value of return is very dependent on the rate of inflation in the currencyof denomination. To the extent that inflation is a monetary phenomenon, the monetary policy framework will be
critical to the real return of a fixed income asset.
The money market provides the basis for maturity transformation that facilitates investment in long-term assets byenabling investors in long-term securities to cover short-term liquidity needs. The African markets with the most liquidinterbank and money markets in general have more investors funding trading portfolios through the Repo markets.
This greatly enhances the efficiency of the long-term securities pricing and trading.
Government securities and Non-Government securities
A fixed income asset is an investment that regularly generates a fixed amount of interest for a specific period of time.
These assets take various forms and include bills, bonds, certificates of deposit, preferred stock, and debentures.
The issuance of fixed income securities is often dominated by the Government starting off with short-term discountTreasury bills that are later rolled into longer-term coupon bearing Treasury bonds as the market becomes more
comfortable with holding and pricing longer-term securities. Corporate issuers begin to benchmark their paper on
government securities. These initial instruments are usually plain vanilla bills and bonds that gradually become moresophisticated from bullet maturities to straight line, step-up and step-down amortization structures, inflation linked
securities whose principal values change with an inflation tracking index, and other more sophisticated instrumentsthat include derivatives like money market and bond futures and options on futures. The development of interest
rate and cross currency derivatives underpins the provision of hedging tools to market participants. The diversity of
instruments is important for investors to select securities that precisely fit their asset requirements while giving accessto issuers the structures that best suit their funding requirements.
Intermediaries
The majority of fixed income markets typically start with issuances of Government securities directly sold to all investors, institutional and retail, that tend to buy and hold until maturity. In a bid to improve liquidity, Primary Dealers
are appointed as a select group of authorized institutions with direct access to the primary market for Government
securities. The Primary Dealers may place bids on behalf of investors in the primary market and provide liquidity inthe secondary market. Our observation is that requirements from these dealers vary greatly from market to market.
Algeria, Ghana, Nigeria, South Africa, Tanzania and Tunisia are a few of the countries with Primary Dealer systems.
Other markets opted to improve liquidity by listing Government securities on the Stock Exchange. This introduced thebroker community as intermediaries into bond trading in addition to their regular stock trading. Kenya and Zambia
markets require trades to be executed through the Stock Exchange.
A continuum of models falls in-between the two extremes ranging from Over-the-Counter (OTC) systems where dealers call each other and transact directly without involvement of brokers and the alternative end where all trades are
executed by brokers on a Stock Exchange. In markets where traders have had the option to trade OTC or on-exchange
they have generally favored the OTC market.

OverviewAs depth in the market continues to grow and transaction sizes get bigger, the need for anonymity increases and sodoes the need for brokers with the balance sheet to take positions. Some markets have licensed inter-dealer brokers
that arrange larger transactions between dealers. Discount houses that buy securities from willing sellers for theirown account have also developed in a few markets to benefit from any market inefficiencies. Pre-trade and post-trade
price transparency in bond markets has tended to lag that of equity markets. Nevertheless investors can find indicative prices to transact at or mark-to-market their portfolios from Stock Exchanges and Central Bank websites. Initially,
Government securities yield curves have been based on primary market prices. Many markets are gradually moving
to secondary market pricing as liquidity improves and benchmarks develop.
Many markets opened by issuing securities at the short end to finance Government expenditure and/or as monetary
policy instruments. The captive and perhaps most relevant investor base was the commercial banking sector withover 80% holdings of outstanding Government issues. Developments in the non-bank financial sectors, pension sector,
foreign investor appetite, and collective investment schemes as well as increased issuance of longer-term securities
have broadened the diversity in holdings for all securities. Currently, the more liquid markets in Africa have lower
commercial bank holding of their outstanding securities than do the less liquid markets. The diversity of the investor base is critical in ensuring liquidity in times when one category of investors is exiting or entering the market in ashort period of time.
Market Infrastructure
Regulation should be cognizant of the level of development of the market. Overbearing regulation in nascent markets
can stifle development while at the same time insufficient regulation can destroy it. The guidebook covers institutions
that determine rules and regulations around the issuance of government and corporate securities. Equally important
are the regulators that determine allowable investment limits for different asset classes. These have a strong bearing
on asset allocation in the market.
The clearing and settlement systems are vital for efficient trading but can be costly especially if the transaction volumes
are small. In nascent markets, script has typically been physical paper that eventually gets transformed to dematerialized electronic bookkeeping. The settlement systems also undergo transformation to electronic Real-Time Gross
Settlement systems for larger size transactions. With this comes the connection of the payment system to the Central
Securities Depository thereby enhancing delivery versus payment processes.
Policy Factors
Tax policy is a key determinant of investment return. Income tax, withholding tax and capital gains tax may apply insome markets. Different tax rates may apply to resident and non-resident investors. Markets may also have bilateraltax treaties that would be of benefit to foreign investors. Taxes may be collected at issue, maturity or when secondary
market trading occurs. These distinctions all have return implications to investors.
Foreign investors will be keen to learn how the foreign exchange rate is determined. This includes market determined
rates reflecting demand and supply or other regimes with varying influence from monetary authorities. This can have
implications on the need to hedge foreign exchange risks and/or determine the appropriate return to compensate
for this risk. Where possible, foreign exchange market turnover is highlighted as an indication of the market depth.
Information on foreign exchange controls is also provided in order to improve awareness of processes that should beconsidered before funds can be invested and externalized. The convertibility of the local currency is critical to externalizing investment returns and principal.
We hope that this guidebook will provide valuable insights into African debt capital markets. Additional information
can be obtained from the capital markets regulators and sovereign issuers in each market, whose contact details havebeen included in this guidebook.

ix

x

Acknowledgements

Acknowledgements
This Guidebook is a product of the staff of the Treasury Department of the African Development Bank, under the guidance of the Treasurer, Pierre Van Peteghem. The book could not have been completed without the kind cooperationand valuable contributions from a variety of individuals and institutions. These include: Central Banks, Ministries ofFinance, Stock Exchanges and the financial institutions listed below that made specific contributions to this guidebook. We also acknowledge making use of economic and financial reports from other listed organizations and sources.
We would like to express our sincere appreciation and acknowledgement to the Bank’s Management and staff for their
input. We are grateful to the Bank’s Country Economists and Operations and Finance Experts for their valuable advice
and input throughout the process. In particular, we wish to thank the dedicated team from the Financial Technical
Services Division of the Treasury Department under the leadership of its Manager, Marie-Laure Akin Olugbade, comprising Stephen Mulema (Task Manager), Boutheyna Bekri, Olivier Eweck, Joana Queiroz, Richard Ofori Mante andSylvestre Tape, who drafted and edited this publication.
The findings, interpretations and conclusions expressed in this volume are entirely those of the authors and should
not be attributed in any manner to the Management or members of the Board of Directors of the African Development
Bank or the Governments they represent. While proper care has been taken in the compilation of the book, the African
Development Bank neither guarantees the accuracy of the data included in this publication nor accepts responsibility
for any consequence of their use.
Dissemination of this publication is encouraged and the African Development Bank will normally grant permission
promptly.
The Bank would like to extend its appreciation to the following individuals at the institutions listed below:

Randolph Oosthuizen, Head of Research, African Alliance,
Lesotho, Namibia, Rwanda, Tanzania and Uganda

Glenn Wepener, Head of sales, MENA Fx, Credit Agricole CIB
Algeria, Egypt, Morocco and Tunisia

Leon Myburgh, Strategy and Research for Sub-Saharan Africa
Fixed Income, Currencies and Commodities
Egypt, Kenya, Nigeria, Tanzania, Uganda, Zambia, West African Economic and Monetary Union

Acknowledgements

Acknowledgements xi

Taiwo Okeowo, Executive Director, FBN Capital Markets.
Nigeria and Ghana

Phumulele Mbiyo, Global Markets Research, Standard Bank
Botswana, Egypt, Ghana, Mauritius, Mozambique, South Africa, Tanzania and Uganda

Ade Adebajo, Director Fixed Income, Standard Chartered Bank
Egypt, Ghana, Nigeria, Tanzania, Sierra Leone, Uganda, Zambia, West African Economic and Monetary Union»» African Economic Outlook, AfDB/OECD, 2009»» Bloomberg»» Economics Intelligence Unit (EIU)»» Encyclopedia of the Nations (http://www.nationsencyclopedia.com/Africa/)»» First Initiative (http://www.firstinitiative.org/Projects/index.cfm)»» Fitch Ratings»» IMF Country Reports, Letters of Intent, Article IV Consultations (http://www.imf.org)»» Moody’s ratings»» Sound Practice in Government Debt Management, Graeme Wheeler, World Bank, 2004»» Standard Bank of South Africa – Economics Division (http://www.ed.standardbank.co.za/srchResearch.asp)»» Standard Chartered Bank – Fixed Income & Rates Strategy Focus (http://research.standardchartered.com)

Country Guides

Algeria
IBERIAN PENINSULA
Algiers
ATLANTIC OCEAN

34.9

Population growth (annual %)1.7

Official language

Rabat
Casablanca

Fès

MOROCCO

Ghardaïa

Marrakech

FrenchCurrency

133.2

GDP growth (annual %)

1.7

Adrar

3,815.7

External Debt (US$ bn)

3.7

External Debt/GDP (%)

2.8

CPI

3.8

Exports of Goods and services (% of GDP)

41.9

Gross Official Reserves (in US$ bn)

141.9

Gross Official Reserves (in months of imports)

35.7

DZD / 1 USD (Year end)

71.91

MAURITANIA

GDP per capita

Tamenghest

MALI

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» The Government securities yield curve longest tenor is 15 years, with nine benchmark points.
»» A growing diversified investor base with marginal presence of foreign investors.
»» Bi-monthly auction of Treasury bills and bonds.
»» Reuters codes for market data:• Reuters: BA/FX01

Tunis

ALGERIA

Algerian Dinar (DZD)

GDP (Current US$ bn)

Quacentina

LIBYA

Population (mn)

MEDITERRANEAN SEA

WahranTUNISIA2009 at a glance

NIGER

4

Algeria Monetary Policy and Money Market
Monetary Policy
The mission of the Central Bank of Algeria (BoA) is tocreate and maintain conditions that are most conducive torapid development of the economy in the areas of money
supply, credit and foreign exchange, while ensuring thestability of domestic price and external value of the currency. The Council of Money and Credit (CMC) formulatesmonetary policy. The BoA implements monetary policy
through various instruments including credit and discountoperations, minimum reserve requirements, open market
operations, and standby facilities.

10 billion, and from DZD 0.5 billion to DZD 3.5 billion
for non-bank financial institutions.
The CMC meets each month to review the implementation of monetary policy and releases a communique of
its outcomes.

Money Market
The main component of the Algerian money market isthe Treasury bills market. The benchmark rates are theaverage interbank rate and the deposit facility interest rate.

In December 2008, the CMC increased the minimum
capital requirement of banks from DZD 2.5 billion to DZDFixed income market
Government Securities
Domestic debt instruments mainly include Treasury bills
and bonds (82% of outstanding government debt). Treasury
bills, also called Bons du Trésor Cessibles (BTC), are issued
with maturities ranging from 3 to 6 months. Treasury
bonds are issued with maturities of 1 to 15 years. Treasury
bonds with a tenor of 1 to 5 years are Bons du Tresor Assimilables (BTA), while Obligations Assimilables du Tresor(OAT) have tenors of 7 to 15 years. Other Governmentissued instruments are Caisse Nationale des Retraites(CNR) bonds and Caisse Nationale d’Assurance Sociale(CNAS) bonds. Issuance of these securities, organizedregularly by the Treasury, is accomplished through Dutch
auctions. All Government Treassury bills and bonds aredematerialized. The day-count is 360 for Treasury bills,
and 365 for bonds.

The following graph illustrates changes in the Government yield curve from December 2008 to December 2009.
Government securities yield curve as at 31
December 2009, 30 June 2009, and 31 December
2008
5%
4%
3%
2%
1%
0%

3-m

6-m

31-Dec-08

1-y

2-y
30-Jun-09

3-y

5-y

Source: Central Bank of Algeria

Auction details

Non-Government Securities
T-bonds

Auction frequency

Twice a month

Twice a monthAuction method

Dutch

Dutch

Settlement cycle

T+2

T+2

AccessAll investors(including foreign entities)

10-y

15-y

31-Dec-09

The details of Government debt issuance are summarized
in the table below:

T-bills

7-y

Non-Government securities are issued occasionally, basedon issuers’ financing needs and market liquidity.

Intermediaries
All investors, including foreign investors, have equal
access to the primary and secondary debt market via
13 authorized primary dealers. As of December 2009,20 banks and 5 financial institutions were active in theAlgerian capital market.

Algeria

Investors
The main investors are commercial banks, mutual funds
and insurance companies. Foreign investor participation isrelatively low. During the first semester of 2009, the total
debt issued by the Government of Algeria was DZD 74
billion, comprised of BTC (34%), BTA (37%) and OAT (29%).

Primary Market
The National Treasury and major corporations, including
financial institutions, regularly issue debt in the local

5

capital market to fulfil their financing needs at competitive prices.

Secondary Market
The Algerian secondary market is relatively liquid. In
2009, the trading volume was DZD 185.3 billion, executed
through 287 transactions. Investors have access to bothsecondary and primary markets through 13 primary dealers, that include commercial banks.

 Foreign Exchange Market
The Algerian Dinar (DZD) exchange rate follows
a managed floating regime, based on a composite of currencies.
The interbank foreign exchange market consists of two
components: the interbank foreign exchange spot market
and the interbank foreign exchange forward market. The
Algerian FX forward market is active up to two years.
The BoA acts as counterparty for spot FX transactions.
Transactions are processed by telephone, telex and otherelectronic systems. The BOA operates continuously andparticipants can conduct transactions during all working
hours.

DZD per Unit of USD (Year End)
80

70

60
Dec-04

Dec-05

Dec-06

Dec-07

Dec-08Dec-09Source: Bloomberg

The opposite graph provides historical levels of the DZD
against the USD.

Derivatives Market
There is no interest rate or cross currency swap market
in Algeria. However, there are a few off-shore non-deliverable forwards (NDF) transactions that have been
executed.

Regulation and Taxation
Regulation
The bond market is regulated by the Commission d’Organisation et de Surveillance des Opérations de Bourse(COSOB), which also sets the operating rules of the Stock
Exchange. The regulatory framework was put in place by
COSOB in the early 1990s and is regularly updated. The
role of COSOB is supervisory in nature; it focuses on theprotection of public savings invested in securities, market
surveillance, and transparency. Any entity planning toraise funds through the stock exchange needs to comply
with the regulations of the Algerian “Code de Commerce”.

The Banking Commission is in charge of supervising thebanking sector, while the Monetary and Credit Board
regulates non-bank lending institutions.

Taxation
Income from Government securities is subject to a 10%
withholding tax. For Treasury bills, the 10% flat tax iswithheld at maturity date, while for coupon-paying bonds
the tax is paid on the date of the coupon payment. Government securities with tenors longer than five years are
exempt from tax.

6

Algeria

Clearing and Settlement
In 2004, Algérie Clearing was officially established as thecentral depository for all securities in Algeria. Algérie

Clearing monitors a computerized settlement and delivery
system. Settlement is T+2.

Regulatory Contacts
Banque Centrale d’Algérie
38, Avénue Franklin Roosevelt,
Villa Jolie Algiers, Algeria
Tel: +213-21-692222
Fax: +213-21-692200
E-mail: ba@bank-of-algeria.dz
Website: www.bank-of-algeria.dz

Commision d’Organisation et de­Surveillance des Operations
de Bourse (COSOB)
17 Campagne CHKIKEN, 16045,
Bal d’Hydra, Alger, Algeria
Tel: +213-21-591015
Fax: +213-21-591019
E-mail: contact@cosob.org
Website: www.cosob.com.dz

Angola2009 at a glance
Population (mn)

18.5

Population growth (annual %)2.6

Official language

Portuguese

Brazzaville
Pointe-Noire

Kinshasa

DEMO. REP. OF CONGO

CabindaKanangaMbuji-Mayi

Kwanza (AOA)
89.5

GDP growth (annual %)-0.04

GDP per capita (Current US$)

4,840

Total Debt (US$ bn)

18.6

Total Debt/GDP (%)

20.7

CPI (annual %)14.2

Exports of Goods and services (% of GDP)

52.0

Gross Official Reserves (in US$ bn)

14.00

Gross Official Reserves (in months of imports)

5.9

AOA / 1 USD (Year end)

89.15

LuandaMalanje

ANGOLA
Benguela

HuamboLubangoZAMBIA

GDP (Current US$ bn)

ATLANTIC OCEAN

Currency

CONGO

NAMIBIABOTSWANA

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» The last decade was a period of significant progress and growth for Angola.
»» Domestic debt offering includes short-dated Treasury bills and Central Bank bills, as well as medium- tolong-term Government bonds. Securities are issued in both USD and AOA.
»» Commercial banks are the only active participants in the domestic debt market.

8Angola Monetary Policy and Money Market
The Central Bank, Banco Nacional de Angola (BNA), is
responsible for implementing monetary policy and managing FX reserves. The significant oil export revenues haveresulted in inflationary pressures that require the Central
Bank to intervene frequently to maintain the monetarybase at the required level.

The rediscount rate and reserve requirements are the
BNA’s preferred policy tools. Recently the BNA relaxed its
requirements by allowing the use of Government bonds as
reserves for both domestic and foreign currency deposits.

 Fixed Income Market
Government Securities
The fixed income market in Angola is at an early stage ofdevelopment. The Government is the sole active issuer,
with a total market capitalization of Government bills
and bonds of USD 6 billion, with a 50/50 split between
bills and bonds.
The offering of Treasury bills includes 28-, 60-, 90 and
182 days maturities, and these instruments are issued tofund short-term liquidity requirements.

paid every six months. For Treasury bonds denominatedin Kwanza (AOA), the nominal USD amount is calculated
daily as per the USD/AOA exchange rate of the day.

Intermediaries
There are no intermediaries at present. Treasury bills
and bonds are issued directly by the Central Bank tocommercial banks.

Investors

There are also longer-term instruments available: Government bonds denominated in local currency have maturities between 1 and 20 years, while foreign currency
instruments extend out to 6.5 years. These instruments
were initially issued to repay arrears that were due todomestic bond holders.

The investor base is composed exclusively of commercial
banks. There are currently 20 banks operating in Angola,
mostly foreign-owned, and principally by South Africanand Portuguese Banks. The market is dominated by threelarge state owned/controlled players: Banco de Fomento
de Angola (BFA), Banco de Poupança e Crédito (BPC) andBanco Africano de Investimentos (BAI).

Auctions are conducted on a weekly basis.1

Primary Market

Inflation-linked instruments are in significant demandand now constitute close to 90% of the market.

The issuance activity of private sector borrowers is nonexistent. It is expected that the creation of a stock exchange
in Luanda will encourage companies to issue in the fixedincome market.

The interest rate on Treasury bonds can be fixed or floating (indexed to USD LIBOR plus a fixed margin) and isSecondary Market

1 Relatorio dos Titulos do Tesouro, 2007-2008, Ministerio das
Financas de Angola

The secondary market is very shallow. The buy-and-holdstrategy adopted by most investors restricts the development of an active secondary market.

 Foreign Exchange Market
The Angolan Kwanza follows a managed floating currency regime, with the Central Bank targeting a strong
Kwanza policy.

there is a gap between the BNA’s Kwanza reference rate
and rates applied in the foreign exchange market. Outward
movement of foreign curency is restricted.

The BNA influences the exchange rate by selling a limited
amount of dollars at a pre-determined rate. As a result,

Net foreign reserves stood at USD 10 billion by the end ofJune 2009, a significant decrease from their peak of USD

Angola20 billion in November 2008. The decline in reserves was
prompted mainly by lower oil and diamond revenues,
coupled with a relatively inelastic import demand.
The opposite graph illustrates the historical levels of the
AOA against the USD.

9

AOA per Unit of USD (Year End)
100

80

60

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08Dec-09Source: Bloomberg Derivatives Market
There is no active derivatives market in Angola.

 Regulation and Taxation
Regulation

Taxation

The Central Bank has regulatory oversight of financial
institutions such as banks, foreign exchange houses andother non-bank financial institutions.

There is a withholding tax of 10% charged on interest
payments to residents and non-residents.

 Regulatory Contacts
Banco Nacional de Angola
151, Av 4 de Fevereiro
Luanda, Angola
Tel : +244 222 399125
Fax : + 244 – 222-390579

Botswana
2009 at a glance

LusakaPopulation (mn)

1.9

Population growth (annual %)1.5

HarareZIMBABWE

EnglishCurrency

Pula (BWP)

GDP (Current US$ bn)

11.6

GDP growth (annual %)-7.3

GDP per capita (Current US$)

Gweru
NAMIBIAFrancistown

BOTSWANA

5,937.7

Total Debt (US$ bn)

2.4

Total Debt/GDP (%)

21.0

CPI (annual %)9.0

Exports of Goods and services (% of GDP)

37.2

Gross Official Reserves (in US$ bn)

8.3

Gross Official Reserves (in months of imports)

18.4

BWP / 1 USD(Year end)

6.6622

Bulawayo

MOZAMBIQUE

Official language

ZAMBIAANGOLA

Gaborone
Pretoria
Johannesburg

Keetmanshoop

MaputoMbabane
SOUTH AFRICASWAZILANDLESOTHO

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

Not rated

Not rated

Moody’s

A2

A2

S&P

A

A-

Source: Bloomberg

Summary»» Capital markets in Botswana have grown significantly in recent years; the nominal value of bonds quoted in the

Botswana Stock Exchange (BSE) has increased from BWP 4 billion in 2006 to BWP 6.06 billion in 2009.
»» Through its bond issuance program, the Government aims to develop a national yield curve and expand therange of long-term finance solutions available to local investors.
»» Commercial banks control a large share of the domestic bond market and pension funds are increasingly one of
the main fixed income investors.
»» The development of an active secondary market has been hampered by the buy-and- hold approach adopted bymost investors.
»» Bloomberg and Reuters codes for market data:• PULF, BBBONDS, STBWBONDS, FNBONDS and SCBONDS.

12

Botswana Monetary Policy and Money Market
Monetary Policy

Money Market

The Central Bank of Botswana (BoB) is responsible for
implementing monetary policy. The bank’s role is allencompassing and includes the supervision of the financial
system, safeguarding public confidence in the national
currency, and advising the Government on economic andfinancial matters.

The Bank of Botswana uses 14 and 91-days certificates(BoBCs) to implement Monetary Policy operations. These
instruments are highly liquid, with a total issuance of BWP
5.9 billion for the 14-day and BWP 10.6 billion for 91-day
as of October 2009. This large volume of transactions is
explained by the absence of alternative short-term money
market instruments. At present, BoBCs are the only attractive short-term investment instruments available.

The Bank targets a low and sustainable inflation level,by using open market operations to influence interest
rates and restrain excessive liquidity. In recent years, thesignificant growth of private pension funds has led to anincrease in liquidity in the domestic market. This has
required the BoB to intervene more frequently.

The purchase and holding of these securities is restricted
to commercial banks.

Fixed Income Market
Government Securities
The total market capitalization of Government and corporate bonds, including foreign bonds with dual listing inother exchanges, stood at BWP 317 billion in September
2009.

bonds, namely BW004, BW005, BW006 and BW003, thatmature in March 2011, September 2018, March 2012 andOctober 2015 respectively. The graph below illustrates
the maturity profile of these securities.

The Government hopes to develop the domestic capital
market through the issuance of bills and bonds by increasing the number of available financial instruments andestablishing a benchmark yield curve, that is shown in
the graph below. All Government bonds pay a fixed rate
coupon and have a bullet type repayment profile. Noneof the existing bonds is callable.

Maturity profile of Government of Botswana
securities as at June 30, 2009 (in Pula)
Billions
2,0

1,5

1,0

Government securities yield curve as at June 30,
2007, 2008 and 2009

0,5

15%
0,0
12%

1 to 2 years

3 to 5 years

5 to 10 years
Maturity

Source: Central Bank of Botswana

9%

6%

0 to 1 year

91
days

182
days

1 year 2 years 3 years 5 years 6 years 9 years

Yields as at June 30, 2009
Yields as at June 30, 2008
Yields as at June 30, 2007

Source: Central Bank of Botswana

As of December 2009, the list of Government securities
comprised a 6-month Treasury bill and of Government

Government bonds are auctioned and traded on a yield-tomaturity basis at uniform price auctions (auctions where
bids are processed at the established cut-off bid price).

Non-Government Securities
The Government has set up a Debt Participation CapitalFund (DPCF) as a special purpose vehicle which securitizes
a portfolio of Government loans to parastatals. The DPCF
has issued bonds with maturities of 3-, 6-, 9-, 12-, 15-, 18
and 21-year tenors so as to provide quasi-sovereign pricing

Botswana

13

benchmarks for corporate issues. All these instruments
are listed in the Botswana Stock Exchange.

The local non-bank investor base (asset management, lifeand general insurance companies) is deep and diversified.

Other public sector issuers include the Botswana Telecommunications Corporation, the Botswana Development
Corporation, the Water Utilities Corporation, the Botswana
Vaccine Institute and the Botswana Building Society.

Foreign investors may participate in the local Government bond market. The 2-year BW001 issued in 2003
proved quite attractive to international investors. The
steep devaluation of the Pula in 2005, which occurredshortly before the instrument’s maturity, had a negative
impact on foreign investors’ confidence. Since then, foreign holdings of Government bonds have been negligible.

The issuance activity of private sector borrowers is dominated by financial institutions, mostly international institutions operating in the country. There are a few nonfinancial corporate issuers, such as Kgalagadi Breweries
and Piermont Group Botswana.

Holdings by category of investor as at June 30,
2009 (in percent)Central Bank 1%

Since 2005, supranational issuers such as the AfDB, theEIB and KfW have tapped the market for local currency
denominated bonds. These issues helped to meet increasing international investor demand for debt in higheryielding currencies.

Commercial Banks
24%

Intermediaries
There are 5 primary dealers for over-the-counter transactions involving Government securities, namely Barclays
Bank Botswana, First National Bank Botswana, Stanbic
Bank Botswana, Standard Bank Botswana and the African
Banking Corporation. All commercial and merchant banks
in Botswana are dealers for issues other than Government
securities.
In addition, four registered brokerage companies areoperating on the Botswana Stock Exchange (BSE).

Investors
Market participants include domestic and foreign companies, commercial banks, corporates, parastatals and institutional investors (pension funds, insurance companies
and mutual funds), as illustrated in the chart opposite.

Other
75%

Source: Central Bank of Botswana

Secondary Market
Most investors prefer to hold securities until maturity.
This buy-and-hold approach restricts the developmentof an active secondary market.
The Bank of Botswana keeps a small portion of thesesecurities to use in Repo operations in the event thatprimary dealers have short-sold their positions in thesecondary market.

Foreign Exchange Market
The Botswana Pula (BWP) is a fully convertible currency
that operates under a crawling-band exchange rate regime
composed of the IMF Special Drawings Rights (SDR) andthe South African Rand.

The graph below illustrates the historical levels of the
BWP against the USD.
BWP per Unit of USD (Year End)
8

Since March 2009, the crawling-band margins have been
set at +/0.125%. The spot market is liquid and the maincross is BWP/USD. However, the BWP is also quoted
against GBP, EUR and ZAR.
There are no restrictions to investment repatriation andno foreign exchange controls. All the Balance of Payments
accounts are liberalized.

7

6

5

4

Dec-04

Dec-05

Source: Bloomberg

Dec-06

Dec-07

Dec-08Dec-09

14

Botswana

Derivatives Market
The main derivatives activity consists of over-the-counter
foreign exchange forwards and hard currency swaps. Bothforwards and currency swaps markets are liquid, withtenors of up to 6 months and 3 months, respectively.
Currency swaps are mostly against the USD, but can becrossed against any hard currency.

Regulation and Taxation
Regulation
Capital markets are supervised by the Botswana Stock
Exchange Committee in conjunction with the Banking
and Capital Markets Unit of the Ministry of Finance.
The BSE was established in 1989 and began formal operations in 1995. It is responsible for regulating and operating
the equity and fixed income markets and has sole jurisdiction in approving securities for listing on the exchange.
The Bank of Botswana has a supervisory role and is authorized to enact management rules and set prudential
standards for banking institutions.

Taxation
Withholding tax on interest is 15% and 10% for nonresidents and residents respectively. There is a 25% capitalgains tax applicable to both residents and non-residents.
Securities issued by domestic public companies are exempt
from capital gains tax.
Botswana has double taxation treaties with France, Mauritius, Russia, South Africa, Seychelles, Sweden and theUnited Kingdom.

The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 to regulate andsupervise non-bank financial Institutions.

Clearing and Settlement
Government bonds are cleared and settled through the
Bank of Botswana. Other bonds are cleared and settled
at the Stock Exchange.
In the context of its 2005 bond issue in Botswana, the
AfDB worked closely with the two main international

securities clearing houses, Clearstream and Euroclear,for the Pula to obtain settlement status. The BWP is thesecond African currency after the South African Rand
(ZAR) to achieve this status. Bonds denominated in BWP
can be fully traded, settled and held, using Clearstream
and Euroclear.

Regulatory Contacts
Bank of Botswana

Capital markets regulator

P/Bag 154
Khama Crescent Street
Botswana
Tel: + 267 360 6567
Fax: +267 390 4325
E-mail: Kganetsanoa@bob.bw
Website: www.bankofbotswana.bw

P/Bag 00314
Showground, MVA House
Botswana
Tel:+ 267 310 2595
Fax: + 267 310 2376
E-mail: werulu@nbfira.org.bw

Botswana

15

Stock Exchange

Insurance regulator

P/Bag 00417
Fairgrounds Plot 64511
Botswana
Tel: + 267 318 0201
Fax: +267 318 0175
E-mail: info@bse.co.bw

P/Bag 00314
Showground, MVA House
Botswana
Tel:+ 267 310 2595
Fax: + 267 310 2376
E-mail: werulu@nbfira.org.bw

Burundi
Kibuye2009 at a glance

Gitarama
KibungoPopulation (million)

8.3

Population growth (annual %)2.8

Cyangugu

Gikongoro
ButareFrenchCurrency

Burundi Franc (BIF)

GDP (Current US$ bn)

1.2

GDP growth (annual %)3.4

GDP per capita

151

External Debt (US$ bn)

0.4

External Debt/GDP (%)

32.1

CPI

12.5

Exports of Goods and services (% of GDP)

6.0

Gross Official Reserves (in US$ bn)

0.3

Gross Official Reserves (in months of imports)

6.6

DEMOCRATIC REPUBLIC
OF CONGO

Official language

RWANDA

Bujumbura

BURUNDI

KibondoTANZANIA

BIF / 1 USD (Year end)

1,230.50

Source: AfDB, BRB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» The Government securities yield curve has longest maturity of 5 years»» Limited investor base with marginal presence of foreign investors.
»» Weekly Auction of Treasury bills and bonds.
»» Reforms to enhance the capital market are ongoing, with a planned introduction of a Repo market

in the medium term.

18

Burundi Monetary Policy and Money Market
Monetary Policy
The Central Bank of Burundi, “Banque de la Republiquedu Burundi” (BRB), formulates and implements monetary
policy. The Central Bank targets monetary aggregates toachieve the main goal of price stability. In 1988, the BRB
shifted from a direct monetary policy (control of money
supply and interest rates) to indirect monetary policy thatuses market-based instruments to influence money supply
and interest rates. These instruments include Treasury

bills, the single refinancing rate, and minimum reserve
requirements for banks.

Money Market
Burundi’s money market is at an early stage of development and at present Treasury bills are the only existing
instruments. In the medium term, the Central Bank hopes
to create a Repo market to strengthen the interbank market and widen the range of available policy instruments.

Fixed Income Market
Government Securities
Treasury bills and bonds are issued on a weekly basis withtenors of 13, 26, and 52 weeks, while Treasury bonds areoffered for maturities of 2 and 5 years.

Government securities yield curve as at 30 June
2007, 2008 and 200910%

Details on Government debt issuances are summarized
in the table below.
8%

Auction details
Auctionfrequency
Auction method
Settlement cycle
AccessMinimum bid
amountForeign investors

T-bills

T-bonds

WeeklyWeeklyMultiple Rate

Multiple Rate

91-d

T+6

30-Jun-09

6%

T+6

All investors, including foreign entities
and subject to foreign exchange restrictions by BRB
One hundred (100) million
Burundi Francs
Eligible, subject to the Minimum
bid amount above

Source; Central Bank of Burundi

182-d30-Jun-08

1-y

2-y

5-y

30-Jun-07

Source : Banque de la République du Burundi (BRB)

Non-Government Securities
Corporations do not issue debt in Burundi. Their financing needs are met through direct loans from commercial
banks. Similarly, municipalities do not issue debt.

Intermediaries

As of 30 June 2009, the total outstanding Government
debt was Burundi Francs (BIF) 135.6 billion, with morethan 64% maturing before one year and the remaining
debt between 1 and 10 years. Interest on Government
securities is payable annually, with bullet repayment of
the principal. These features are subject to changes by theTreasury to accommodate investors’ needs.

Capital market intermediation activity is provided bycommercial banks, as there are no primary dealers. Investors’ orders, including orders from foreign investors,
are executed by commercial banks through their security
account with the Central Bank. Due to lack of the liquidity
in the secondary market, all transactions are executed in
the primary market.

The opposite graph presents the changes in the Government yield curves over the last three years. The yield
curve was extended in 2009 with the issue of a 5-year
Treasury bond.

Investors
The Burundi debt market is not very active. The maininvestors are commercial banks, pension funds and insurance companies. Foreign investors have access to theBurundi

19

fixed income market, but so far, their participation has
been marginal.
Commercial banks account for more than 65% of the outstanding Government debt holdings, while the Central
Bank and insurance companies hold 24.22% and 6.26%
of Government debt, respectively.

Primary Market
As the issuer of debt for the Republic of Burundi, theTreasury issues Treasury bills and bonds to fulfil theGovernment’s financing needs.

Secondary Market
There is no secondary bond market in Burundi; mostinvestments are held to maturity.

Details of the holdings by category of investors at theend of the second semester 2009 are provided in thefollowing chart.
Holdings by category of investor as at June 30,
2009 (in percent)
Others, 0.221%

Central Bank,
24.221%

Commercial Banks,
65.085%Pension Funds,
4.204%
Insurance Co.,6.269%

Source: BRB

Foreign Exchange Market
The exchange rate policy has recently shifted from a managed float to a flexible, market-determined exchange rate
regime. The BRB intervenes in the FX market by two-way
auctioning which allows either commercial banks or BRB
to sell or buy foreign currency at market determined rates.
Capital account transactions remain subject to some restrictions in terms of prior approval by BRB for outward
foreign direct investment.
Interest income and capital gains by foreign investors arefreely repatriated. Non-residents are allowed to holdaccounts in foreign currencies or in Burundi Franc for
their investments, subject to confirmation of the foreignexchange transaction with an authorized dealer.

The graph below provides historical levels of the BIF
against USD.
1,500

1,200

900

Dec 2004

Source: BRB

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

20

BurundiDerivatives Market
There is no derivatives market in Burundi.

Regulation and Taxation
Regulation

Taxation

The Central Bank of Burundi oversees the banking sector
while the Ministry of Finance, through the Regulation andControl Agency, supervises the insurance sector.

Interest income and capital gains on Treasury bills andbonds are tax exempt, for all categories of investors.

Clearing and Settlement
The Central Bank of Burundi is the clearing and settlement
house, as well as the central depository for securities.
Not all investors hold accounts with the BRB and only
commercial banks are authorized to open securities accounts with the central bank for their trading activities
or for their clients.

Regulatory Contacts
Banque de la République du Burundi
BP 705, Bujumbura, Burundi
Tel: +257 2222 5142
Fax: +257 2222 3128
Website: http://www.brb-bi.net

All securities are identified with a standard code that
includes the date, month and year of issue. Settlement
is made on a gross basis, and delivery versus payments
is not yet achieved.

Cape Verde2009 at a glance

Ribeira GrandeSanto AntãoPopulation (mn)

0.5

Population growth (annual %)1.4

Official language

Tarrafal

Mindelo
Palmeira

São Nicolau
Ribeira Brava

São Vicente

Sal

Santa Maria

Portuguese

Currency

Cape Verde Escudo(CVE)

GDP (Current US$ bn)

1.9

GDP growth (annual %)3.3

GDP per capita (Current US$)Sal Rei

CAPE-VERDEATLANTIC OCEAN

Tarrafal

1.1

Total Debt/GDP (%)

57.7

CPI (annual %)4.7

Exports of Goods and services (% of GDP)

15.1

Gross Official Reserves (2008 - in US$ bn)

0.3

Gross Official Reserves (2008 - in months ofimports)

2.7

CVE / 1 USD (Year End)

Curral Velho
Boa Vista

3,688.1

Total Debt (US$ bn)

Maio

AssamadaSão Filipe
SintraBrava

Porto Inglés

Praia
Fogo

Santiago

73.9810Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Pedra Lume

Local Currency

Foreign Currency

Fitch

BB-

B+

Moody’s

Not rated

Not rated

S&P

B+

B+

Source: Bloomberg

Summary»» Cape Verde has a small but well-established financial system.
»» The country’s banking sector is still fairly isolated from the global markets and was shielded from the recent

financial turmoil.
»» The fixed income market is dominated by central Government issuance.
»» The investor base is dominated by commercial banks.

22Cape Verde Monetary Policy and Money Market
The Central Bank, Banco de Cabo Verde (BCV), is responsible for defining monetary policy. The main policy goalis maintaining the fixed currency peg of the Cape Verde
Escudo (CVE) against the Euro.
The BCV auctions Central Bank bills to influence interest rates using “Titulos de Regulacao Monetaria” (TRM),
with maturities of up to 14 days. The BCV also conducts

open market operations to mop up excess liquidity using“Titulos de Intervencao Monetaria” (TIM).
In addition, the BCV uses foreign exchange sales to local
banks as a policy setting mechanism.
The interbank money market is rather illiquid, characterized by a restricted number of participants.

Fixed Income Market
Government Securities

Intermediaries

The offering of Treasury bills includes securities of 91-,
182and 364-days maturities. Bills are sold through auctions by the BCV.

The BCV is the issuer of all Government securities. Alltransactions involving fixed income instruments issued byprivate companies are conducted via commercial banks.

Longer instruments are also available, with maturities of 3,5, 6 and 10 years which are used to finance medium andlong-term Government spending. The minimum dealing
size for Treasury bonds is CVE 10,000.

Investors

The graph below illustrates the Government securities
yield curve.
Government securities yield curve as at 20 April 2010
8

There is also an offshore banking market, which comprises
eight international banking institutions.
Additionally, there is a thriving market for non-bankfinancial institutions such as Insurance companies, AssetManager and Pension Funds.

7
6
5

Retail Investors are encouraged to participate in the fixedincome market. A large portion of these small investors
are part of the Cape Verde Diaspora.

4
3

Commercial banks are the main buyers of Government
bills and bonds in the competitive market. To date, there
are five commercial banks active in the country: “Banco
Comercial do Atlantico”, “Caixa Economica de Cabo Verde”,“Banco Interatlantico”, “Banco Caboverdiano de Negocios”
and “Banco Africano de Investimentos”.

1
91 182 1
week days days yr

2
yrs

3
yrs

4
yrs

5
yrs

6
yrs

7
yrs

8
yrs

9
yrs

10
yrs

Source: Central Bank of Cape Verde

Non-Government Securities
The number of corporate bonds in the market is small
and limited to a few well-established banks, the nationaltransport companies and real estate operators. In 2008,
for the first time, a privately held bank issued a bondwithout Government guarantee.
The interest rate profile of available instruments includes
fixed and floating rates. As of late 2009, the longest available maturity was 10 years.

Secondary Market
The secondary market is not very active, with most investors adopting a buy-and-hold approach. The developmentof a thriving secondary market is one of the cornerstones of
the country’s medium and long-term debt market strategy.

Cape Verde23

Foreign Exchange Market
The Cape Verde Escudo is under a fixed peg regime to theEuro. The Central Bank monitors its policy interest rate
in a manner consistent with the peg.
Current account transactions have been liberalized. Foreign
investors are allowed to hold foreign currency denominated accounts.

CVE per Unit of USD (Year End)100

80

The opposite graph provides historical levels of the CVE
against USD.
60

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg

Regulation and Taxation
Regulation

Taxation

Capital markets are regulated by the “Codigo do Mercado
dos Valores Mobiliários” which regulates the issuance ofbonds. The BCV has regulatory oversight of the financial
sector. Insurance companies fall under the supervision of
the Ministry of Finance.

Interest paid on Treasury bills and bonds is exempt fromtax. Corporate-Bonds are taxed at a rate of 5% as of 2009.

Clearing and Settlement
The BCV is in charge of maintaining the country’s payment system. The “Sistema Integrado de Compensacao
Interbancaria e de Liquidacao” (SICIL) is the settlement
mechanism used for transactions involving the BCV, commercial banks, the Treasury and the stock exchange.1 This
1 Banco Central de Cabo Verde: Relatorio de Estabilidade Financeira
2008

Regulatory Contacts
Banco de Cabo Verde
CP 101 Praia
Cape Verde
Tel: (+238) 261 5526/5530
Fax: (+238) 261 1914
Email: drs@bcv.cv
Website: www.bcv.cv

system was supported by physical documents, although
it is evolving progressively to an electronic processing
system.

Central African Economic and­Monetary Community (CEMAC)
2009 at a glance

Cameroon

CentralAfricanRepublic

Chad

Congo

Equatorial
GuineaGabon

Population (mn)

19.5

4.4

11.2

3.7

0.7

1.5

Population growth (annual %)

2.3

1.9

2.7

1.7

2.6

1.8

French/EnglishFrenchFrench/ArabicFrenchSpanish/FrenchFrenchOfficial language
Currency

CFA Franc (XAF)

GDP (Current US$ bn)

24.4

2.1

5.1

12.6

11.6

11.7

GDP growth (annual %)

2.4

2.3

1.7

9.5

-4.1

0.7

1,248.7

475.6

453.8

3,431.3

17,164.9

7,937.4

Total Debt (US$ bn)

1.7

1.1

1.5

2.1

0.1

2.1

Total Debt/GDP (%)

7.1

48.2

30.1

16.8

1.0

17.6

CPI (annual %)

2.6

3.3

4.0

4.0

5.1

1.9

Exports of Goods and services(% of GDP)

22.7

12.3

49.7

77.4

92.1

56.7

Gross Official Reserves (in US$ bn)

3.1

0.1

0.9

3.6

3.8

1.8

Gross Official Reserves(in months of imports)

5.9

3.5

2.8

9.5

10.2

5.9

GDP per capita (Current US$)XAF / 1 USD (Year End)457.840

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Gabon
Fitch

BB-

BB-

Moody’s

Not rated

Not rated

S&P

BB-

BB-

Cameroon
Fitch

B-

B

Moody’s

Not rated

Not rated

S&P

B

B

Chad, Congo, Equatorial Guinea, Central African Republic
Fitch

Not rated

Not rated

Moody’s

Not rated

Not rated

S&P

Not rated

Not rated

Source: Bloomberg

Summary»» The Government bond market in the CEMAC regionis still at a nascent stage with only one Government
bond outstanding.
»» The CEMAC region has an active corporate bondprimary market.
»» Framework is in place for weekly and monthly
auctions of Treasury bills and bonds. Issuances are
expected in the coming months.

nulf of Guinea

TUNISIALE
Beir

Tel Aviv-Jaffa
Jerusalem

Tripoli

ISR

J

LIBYA

EGYPT

ALGERIA

NIGER

CHAD
SUDAN

BENIN

N'Djamena
TOGO

Y
T

CYPRUSCrete

NIGERIAA

CENTRAL
AFRICAN REPUBLIC

Porto
Novo

CAMEROONBata

EQUAT.
GUINEA

BanguiYaoundéLibreville

CONGO

GABON

DEMOCRATIC
REPUBLIC OF
CONGO

RWANDA
BURUNDI

Brazzaville

ANGOLA

Harare26

Central African Economic and Monetary Union (CEMAC)

CEMAC Overview
The Economic and Monetary Community for Central
Africa (CEMAC) has six member states: Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea
and Gabon. The framework for this organization was
prepared in 1994 by the Customs and Economic Unionof Central Africa (UDEAC). UDEAC was superseded by
CEMAC in 1999.
CEMAC aims to promote the regional and economic
integration of its member states by forming a monetary
union. CEMAC member countries share a common independent Central Bank, the Bank of Central African States(Banque des Etats de l’Afrique Centrale – BEAC), and acommon currency, the CFA Franc (Franc de la Coopération
Financière en Afrique Centrale).
In 2003, CEMAC countries agreed to create a common
regional stock exchange market with the establishmentof the BVMAC1, located in Libreville, Gabon, while Cameroon launched its own stock exchange, the Douala Stock
Exchange (DSX). The BVMAC welcomed its first operations in August 2008 with the listing of the Gabonese
Republic’s initial sovereign bond.

1

Bourse des Valeurs Mobilières de l’Afrique Centrale

Monetary Policy and Money Market
The BEAC’s main policy goal is to maintain price stability
and to the extent possible to support the general economic
policies of member countries. The BEAC also aims topreserve the stability of the CFA Franc (XAF), which is
pegged to the Euro. The French Treasury guarantees theconvertibility of the XAF.
The BEAC sets the monetary policy for the CEMAC’s zone
and that of the individual member states. The Bank focuseson keeping monetary and credit variables under control
and in line with macroeconomic objectives such as GDP
growth and balance of payments stability.
A monetary policy committee takes policy decisions whenneeded and communicates final decisions to the public.
The target inflation rate for the region has been set at a
maximum of 3%.

The BEAC uses both reserve requirements and the discount window to implement its policy. The Bank’s main
benchmark interest rate is the “taux d’intérêt des appels d’offres” (TIAO), which is the interest rate at whichfunds are extended to financial institutions. The Bank
also provides funding to CEMAC member states to fundtheir deficits.
The funding is charged at specific rates set by the Governor. In July 2002, the BEAC decided to limit its membercountry draw-downs to 20% of the amount of tax receipts
corresponding to the previous fiscal year, however, thismeasure was never enforced. On 1 July 2009, member
countries renewed their commitments to annually reduce
the outstanding amount of their borrowings from the
BEAC by gradually replacing BEAC’s loans with Treasury
bills and bond. There is no money market benchmark
reference in the XAF zone.

Fixed Income Market
Government Securities

Instruments

The Government bond market is still at a nascent stage as
there is no significant bond issuance track record. There
has been no recent Treasury bills and bonds issuancefrom member states.

In order to fulfil their short-term funding needs, nationaltreasuries are allowed to conduct weekly auctions to issue short-term debt. Member states are also allowed to
conduct monthly auctions to issue Treasury bonds of
2-year tenor and above. In addition, bond syndication
by local and foreign issuers is allowed.

Central African Economic and Monetary Union (CEMAC)

27

Intermediaries
Treasury bills and bonds (Bons et Obligations du Trésor)can be issued through weekly and monthly auctions respectively with 13-, 26 and 52-week tenors for Treasury
bills and 2-years maturity or more for Treasury bonds.
The national treasuries of member states act as issuing
agents to fulfil their respective countries’ budget deficits
and debt management requirements.

Primary subscription of Treasury bills and bonds is tosome extent limited to primary dealers, including banks
and national and regional financial institutions, whichhave a depository account with BEAC. Since 2004, a few
brokerage houses have been created in the region: 3 in
Gabon and 11 in Cameroon. There are also investmentbanks licensed as brokers.

The details of Government debt issuance are summarized
in the table below.

Investors

Auction details
Auctionfrequency
Auction method

T-bills

T-bonds

WeeklyWeeklyRequested/
Multiple rates

Requested/
Multiple rates

Settlement cycle

BVMAC (T+3)
DSX (T+4)

AccessThrough 15 primary dealers

Minimum bid
amount

The BEAC does not purchase securities for its own booksin the primary market, but under certain conditions canintervene in the secondary bonds market and purchasesecurities that were issued by public auction.

XAF 10 million

Foreign investors

Not allowed to participate

Primary Market

Non-Government Securities
The CEMAC corporate debt market is still at a nascentstage. Up to 2008, the only issues were the BDEAC private
placements2, and the City of Douala inaugural mediumterm notes programme3. In 2009, two bond issues werelaunched by IFC and Prix-Import. The table below provides
a list of bond issues in the CEMAC zone.
2
3

All investors have direct or indirect (via brokers anddealers) access to the primary market. Foreign investors
can participate in the market through local banks. Banksdominate the financial sector and account for most of thefinancial assets. A few foreign banks have established apresence in three CEMAC countries, and together represent about one-third of the sector. Credit growth remains
hampered by a lack of competition. A significant reductionof credit extension was observed in 2009 as local bankssought to reduce their exposure.

BDEAC issued in 2007, XAF 30bn 5.50% 2012 bond
City of Douala Issued in 2005, XAF 16bn 2010 8.25% bond.

Participation at auction is restricted to primary dealerswhich hold sufficient reserves in their depository accounts
with BEAC.
However, in the case of bonds syndication, all investors(foreign and domestic) have free access to the primarymarket. The minimum investment size is XAF 10 million. Transactions on securities issued by public auction
are executed over-the-counter (OTC) while syndicatedbonds are traded both on the stock exchange and OTC.

List of bonds issued in the CEMAC zone since 20054
Year

Issue nameRatingNominal(in bnXAF)

Coupon2009

International Finance Corporation
(IFC)

AAA

20.00

4.25%

Annual2014

Listed on BVMAC
&DSX

2009

Prix-Import

N/R

500.00

7.00%

Annual2014

Listed on the BVMAC

2008

BGFI

N/R

40.00

5.00%

Annual

2014

Private Placement

2008

Banque Gabonaise de Développement (BGD)

B+

10.00

6.00%

Annual

2014

Private Placement

2007

Republic of Gabon

BB-

100.005.50%

Annual2013

Listed on the BVMAC

2007

Central African Republic

N/R

45.00

8.00%

Annual

2012

Cancelled

2007

BDEAC

N/R

30.00

5.50%

Annual

2012

Private Placement

2005

City of Douala

N/R

16.00

8.25%

Annual

2010

Private Placement

4

Source: COSUMAF as at March 24, 2010.

CouponMaturity­Frequency(year)

Remarks

28

Central African Economic and Monetary Union (CEMAC)

Secondary Market
The standard day-count conventions are Act/365 forbonds and Act/360 for the money market. Currently,
only fixed coupon debt instruments with bullet repayment are allowed.

The secondary market is still embryonic. All secondary market transactions must be conducted via certified
intermediaries such as banks, non-bank institutions,regional financial institutions, asset managers and brokerage companies.

Foreign Exchange Market
The CFA Franc (XAF) follows a fixed currency peg regime
against the Euro. The Franc is not traded outside of theunion, but is fully convertible against the Euro. The parity
is currently set at 655.957 XAF per 1 EUR.
The current account is fully liberalized while capital account transactions are subject to declaration requirements.

XAF per Unit of USD (Year End)
600

500

400
Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg

Derivatives Market
Currently, there is no active derivatives market in theregion.

Regulation and Taxation
Regulation
With the exception of Cameroon, the BEAC and the Commission de Surveillance du Marché Financier de l’AfriqueCentrale (COSUMAF) oversee the capital market, whereas
the BVMAC (the regional stock exchange is not yet fully
operational) authorizes the listing of companies and oversees trading and brokers’ activities in the CEMAC zone.
In Cameroon, the capital market authority is the Commission des Marchés Financiers (CMF), which oversees
the Douala Stock Exchange (DSX).

The insurance sector and banking sector are respectively
supervised by the Conférence Interafricaine des Marchésd’Assurances (CIMA) and the Commission Bancaire del’Afrique Centrale (COBAC), while the Groupe d’action
Contre le Blanchiment d’Argent en Afrique Centrale (GABAC) deals with money laundering.

TaxationInterest and capital gains on securities are taxable at 15%.
However, interest generated on Treasury bills and bonds
is exempt for CEMAC residents.

Central African Economic and Monetary Union (CEMAC)

29

Clearing and Settlement
There are three main clearing and depository houses in
the CEMAC zone. The clearing and settlement of Treasury
securities and other fixed income instruments is done
automatically through different settlement platforms.
Securities issued by public auction are settled by the Cellule de Règlement et de Conservation des Titres (CRTC)
hosted at the BEAC, securities listed on the BVMAC are
settled directly by the exchange, and bonds listed at the

DSX are settled by the Caisse Autonome d’Amortissement
du Cameroon (CAAC).
Settlement of transactions is conducted at the close ofeach trading day. The minimum delivery delay is T+2.

Regulatory Contacts
Banques des Etats de l’Afrique Centrale(BEAC)
BP 83, Yaoundé, Cameroon
Avenue Vogt, Yaoundé, Cameroon
Tel: +237-223-0511/3390
Fax: +237-223-3380
E-mail: beac@beac.int, beacyde@beac.int
Website: www.beac.int

Bourse des Valeurs Mobilières
de l’AfriqueCentrale (BVMAC), Place de l’Indépendence
B.P. 2165, Libreville, Gabon
Website: www.bvm-ac.com

Commission Bancaire de l’AfriqueCentrale COBAC)
BP 1917, Yaoundé, Cameroon
Avenue Vogt, Immeuble de la BEAC, Yaoundé, Cameroon
Tel: +237-223-4060/4030
Fax: +237-223-3329

Douala Stock Exchange (DSX)
BP 442, Douala, Yaoundé
1450 Blvd. de la
Liberté, Douala, YaoundéTel: +237-343-8583
Fax: +237-343-8584
E-mail: dsx@douala.stock-exchange.com
Website: www.douala.stock-exchange.com

Commission de Surveillance du Marché
Financier de l’Afrique Centrale (COSUMAF) B.P. 1724,
Libreville, Gabon
Tel: +241-747591
Fax: +241-747588
E-mail: infocosumaf@cosumaf.org
Website: www.cosumaf.org

Comoros2009 at a glance

Mitsamiouli

Population (mn)

Mbéni

0.7

Population growth (annual %)2.3

Official language

French/Arabic

Currency

Comorian Franc(KMF)

GDP (Current US$ bn)

NtsoudjiniMoroniCOMOROS

Koimbani
Grande Comore
Foumbouni

Mutsamudu
Sima

0.5

GDP growth (annual %)1.0

GDP per capita (Current US$)

775.6

Total Debt (US$ bn)

0.3

Total Debt/GDP (%)

48.5

CPI (annual %)4.8

Exports of Goods and services (% of GDP)

15.7

Gross Official Reserves (2008 - in US$ bn)

0.1

Gross Official Reserves (2008 - in months ofimports)

5.3

KMF / 1 USD ( Year End)

INDIAN OCEAN

Fomboni
AnjouanDomoniM’Ramani

Mohéli343.181

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» The market does not have fixed income securities.
»» Monetary and exchange rate policy is governed by the exchange rate peg enshrined in the Franc Zone Monetary

Cooperation Agreement»» There is free convertibility of earnings and capital.

32

Comoros Monetary Policy and Money Market
The requirement to maintain the Franc Zone peg is thedeterminant of monetary policy and is intended to help
maintain a level of net foreign assets that is consistent withthe monetary cooperation agreement signed with France.
In this context and under the statutes of the Central Bankof Comoros (CCB), the coverage of short-term liabilitiesof the CCB by its foreign assets must be above 20%. The
peg to the Euro has provided an anchor for price stability.

The CCB has set intermediate goals for money supply
and domestic credit that it achieves through reserve
requirements, a discount rate and refinancing limits on
Government expenditures. The reserve requirement of
35% applies to all liabilities in the banking system andis remunerated by the CCB at a specific policy rate. The
possibilities for refinancing of the state by the CCB are
limited to 20% of the average ordinary budget revenues
actually collected during the three previous fiscal years.

 Overview of Financial Sector
Until recently, the financial sector comprised of only one
foreign-owned commercial bank, a development bank, apostal savings bank, and two networks of microfinanceinstitutions (MFIs). In the last two years, the Central Bankof Comoros (BCC) has granted licenses for the opening of
two new foreign commercial banks, including one branchof Tanzania’s EXIM Bank. These developments are bringing
about much needed expansion of financial intermediation.

Against this background, the IMF in conjunction with
Banque de France is providing technical assistance to the
BCC to strengthen financial sector supervision.
The Ministry of Finance, as recommended by the BCC
established an interest rate floor and cap. However, financial institutions determine their own credit and lending
policies independently.

 Foreign Exchange Market
The Comoros belongs to the Franc Zone. A monetary
cooperation agreement was signed between France andthe Comoros on 23 November 1979. This cooperation isbased on the following criteria:»» the unlimited guarantee by France of the currency

issued by the CCB;»» the Comorian Franc (KMF) is pegged to the Euro at
KMF 491.96775 / 1 EUR;»» deposits with the French Treasury (at least 65% offoreign exchange reserves of the Comoros); and»» free transfers between the Comoros and France.
International financial transactions between the Comoros
and foreign counterparties are freely convertible.

KMF per Unit of USD (Year End)
500

400

300

Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Comoros Regulation and Taxation
The Banking system is regulated by the Central Bank ofComoros.

 Regulatory Contacts
Banque Centrale des Comores
B.P. 405, Moroni, Comoros
Tel: +269-73-0243, 72-1002
Fax: +269-73-0349
E-mail: bcc@snpt.km

33

Democratic Republicof Congo
CENTRAL AFRICAN REP.

2009 at a glance
66.0

Population growth (%)

2.7

Official language

CAMEROON

FrenchCongolese Franc(CDF)

GDP (Current US$ bn)

11.9

GDP growth (annual %)2.7

GDP per capita (USD)

179.6

External Debt (US$ in bn)

13.8

External Debt/GDP (%)

116.6

CPI(annual change % –end of period)

24.3

Exports of Goods and services (% of GDP)

42.4

Gross Official Reserves (in US$ bn)

1.1

Gross Official Reserves (in months of imports)

2.0

CONGO
GABON
FrancevilleBrazzaville
Pointe-Noire

Kinshasa

Mbandaka

Kisangani

DEMOCRATIC
REPUBLIC
OF CONGO

CabindaMatadi

Benguela

907.1852

Sovereign rating as at March 24, 2010
Local Currency

KabaleRWANDA
KigaliBURUNDI
Bujumbura

KigomaLuandaSource: AfDB, BBC, Bloomberg

Long-term

BukavuKanangaMbuji-Mayi

ANGOLA

CDF / 1 USD (Year end)

UGANDA

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» Government issues Treasury bills with maturities up to 28 days.
»» Weekly auctions for 7-day Treasury bills and monthly auctions for 28-day Treasury bills.
»» Commercial banks are the main investors.
»» No secondary market activity.

Lubumbashi
Solwezi
ZAMBIATANZANIA

Population (in millions)

Currency

SUDAN

Bangui

36

Democratic Republic of Congo Monetary Policy and Money Market
Monetary Policy

Money Market

The Central Bank of the Democratic Republic of Congo(DRC), the Banque Centrale du Congo (BCC), was established in 1960. It supervises the financial system andacts as the financial and fiscal agent of the Government,
providing advice on economic and monetary management issues. One of the primary objectives of the BCC
is to maintain price stability. The BCC formulates andimplements monetary policy through open market operations, reserve requirements and the discount rate forcommercial banks.

The main instruments in the DRC money market are
Treasury bills (Billet de Trésorerie – BTR), which are issued by the BCC at weekly auctions.
The first component of this market is the short-term loan
window through which authorized commercial banks
can borrow funds from the BCC for a 7-day maximum
tenor. The second component is the permanent facility
window that allows banks to unwind their daily shortpositions within 24 hours, subject to appropriate collateralwith the BCC.

Fixed Income Market
Government Securities
The BCC issues BTR with 7-day and 28-day maturities
to absorb excess liquidity in the interbank market. Depending on the monetary policy requirement, BTR may
be issued for different maturities. These securities are
fully dematerialized and sold through commercial bankswith current accounts and securities accounts at the BCC.
They are issued weekly, and are freely tradable throughthe banking system. The rates are set by the BCC basedon the year-to-date inflation levels plus a premium. The
day-count basis convention used for BTBs is acutal/360.

Historical BTR weighted average rates from 2003 to
2009
80%
70%
60%
50%
40%
30%
20%
10%
0%

Auction details

Dec-03

Dec-04

BTR 7-days

Dec-05

Dec-06

BTR 14-days

Dec-07

Dec-08Dec-09BTR 28-days

T-bills
Auction frequency• Weekly for 7-day BTR• Monthly for 28-day BTR*

Auction method• Banks through competitive bids;• Individuals non competitive bids

Settlement cycle–

AccessBanks and other financial institutions

Minimum bid
amountCDF 1 000000.

Foreign investors

No restriction(*) Depending on the monetary policy needs

The following graph illustrates the change in BTR weighted
average interest rate from 2003 to 2009.

Source: BCC

Non-Government Securities
There is no corporate debt market in the DRC. Private
sector financial needs are met directly through commercial bank loans.

Investors
Commercial banks are the main investors as they accountfor the majority of BTR holdings.

Primary Market
The primary market is restricted to commercial bankswith securities accounts at the BCC. Institutional andretail investors submit their bids through these commercial banks.

Democratic Republic of Congo

37

Secondary Market
Commercial banks may buy or sell BTR on the secondary
market. In both cases, they are obliged to display prices,
both bid and ask, at which they are willing to conducttransactions.

As of 31 December 2009, the outstanding stock of BTR
was CDF 56.57 billion, an increase of 20.6% compared tothe outstanding balance as of December 2008.

Foreign Exchange Market
The Congolese Franc (CDF) was introduced in 1998. The
main objective of the DRC exchange rate policy is to reducethe currency’s volatility through a managed exchange rate
system. The interbank FX market determines the market
rate.
The opposite graph provides historical levels of the CDF
against the USD.

CDF per Unit of USD (Year End)
1000

800

600

400

200

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08Dec-09Source: Bloomberg

Derivatives Market
There is no derivatives market.

Regulation and Taxation
Regulation
The BCC supervises the banking sector, which comprises
21 commercial banks and several microfinance institutions.

TaxationInterest and capital gains are taxable at 20% per annum.

Clearing and Settlement
Each bank holds a securities account with the central
bank. A special clearing and settlement session is organized every Wednesday to pay the BTRs presented oncollection by banks and to issue new ones for purchasespresented by banks.

38

Democratic Republic of Congo Regulatory Contacts
Banque Centrale du Congo
B.P. 2697, Kinshasa, Democratic Republic of Congo
Boulevard Colonnel Tshashi
563, Kinshasa, Democratic Republic of Congo
Tel: +243-122-0704
Fax: +243-880-5152
E-mail: cabgouv@bcc.cd
Website: www.bcc.cd

Djibouti
2009 at a glance

RED
SEA

Population growth (annual %)1.7

Official language

ERITREA

Currency

Moulhoulé

ETHIOPIA

FrenchKhor Angar

Djiboutian Franc(DJF)

GDP (Current US$ bn)

1.1

GDP growth (annual %)

5.1

B
DE
AN
M
EL

0.9

B
BA

Population (mn)Assa Gueila
Dorra

Obock

GDP per capita (Current US$)1,319.1

Total Debt (US$ bn)

0.7

Total Debt/GDP (%)

57.8

CPI (annual %)7.7

Exports of Goods and services (% of GDP)

46.8

Gross Official Reserves (in US$ bn)

0.2

Gross Official Reserves (in months of imports)

3.1

DJF / 1USD (Year end)

177.720

Eli Dar

GalafiRanda

DJIBOUTI

Djibouti

Hol Hol

DikhilAli Sabieh
Daouenlé
SOMALIAETHIOPIA

Sovereign rating as at March 24, 2010
Local Currency

GULF OFADEN

Yokobi

Source: AfDB, Bloomberg

Long-term

Tadjoura
GULF OFTADJOURA

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» There are no fixed income Government securities in Djibouti.
»» The Djiboutian Franc follows a currency board foreign exchange regime and is freely convertible.
»» There has been significant growth in the banking sector during the last three years.

40

Djibouti Monetary Policy and Money Market
Monetary policy is implemented by the Central Bank, theBanque Centrale de Djibouti, acting on behalf of the National
Council of Money, Credit and Foreign Trade. Monetary
policy of the Central Bank seeks to preserve the value ofthe local currency by maintaining the currency board.
The supply of money in Djiboutian Francs (DJF) is determined by the available coverage in USD at the fixedexchange rate. Djibouti does not use open market operations or reserve requirements as monetary policy tools
but is considering the introduction of reserve requirement
to mop up structural liquidity and contain inflationarypressure. The monetary authorities may extend credit to
the state, subject to the specific consent of the Council of
Ministers and given the obligations of full convertibilityof national currency.

 Overview of the Financial Sector
The banking sector has experienced significant growthin the last three years. Indo-Suez Bank, in existence formore than 100 years, and Commercial and Industrial Bank(BCIMR), operational for more than 50 years, have dominated Djibouti’s banking industry. The BCIMR, a majority
French-owned bank, controls around 60% of the market.
During 2009, eight new banks, both Islamic and conventional, were licensed and began operations in the banking sector. This number is considerably higher than thethree that were present in 2006. Iraq-based Warka Bankfor Investment and Finance and Egypt’s Shoura Bank are
expected to start operations in Djibouti in 2010.
Most of the new banks are from regional neighbouring
countries seeking exposure to the region,primarily byproviding deposits and international transactions services to Ethiopian customers engaged in imports/exports.
Djibouti supplies port facilities to Ethiopia.

There is no insurance provision on deposits, however
the Central Bank supervision ensures adherence to prudential rules.
The pension system is based on a pay-as-you-go systemthat was created by the French administration before
Djibouti’s independence, and is comprised of the following three pension funds: the Caisse Nationale de Retraite
for civil servants, the Organisme de Protection Sociale forprivate sector employees and public enterprises, and the
Caisse Militaire de Retraite for military personnel.
Money transfer services are vital to the functioning of thefinancial sector. The international money transfer network
Dahabshil opened its first bank branch in Djibouti in
March, and intends to offer Sharia-compliant products.
Djibouti is a member of the regional Free Trade Area of theCommon Market for Eastern and Southern Africa(­COMESA).

 Foreign Exchange Market
Djibouti has followed a Currency Board FX regime formore than three decades. Accordingly, the full issue of
the Djibouti Franc is covered by its foreign exchange
reserves. The Djibouti Franc is pegged to the US Dollar,
at DJF 177.721 / 1 USD. Djibouti has no foreign exchange
restrictions. There are no limitations on converting ortransferring funds, or on the inflow and outflow of cash.
Second-tier banks are required to have coverage in convertible currency that is proportionate to their deposits
in national currency.

DJF per Unit of USD (Year End)
200

175

150

The opposite graph provides historical levels of the DJF
against the USD.

Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Djibouti Regulation and Taxation
The financial sector is supervised and regulated by the
Banque Centrale de Djibouti. There is no tax on financial
income, profits or foreign exchange transactions.

 Regulatory Contacts
Banque Centrale de Djibouti Mailing
B. P. 2118,
Djibouti
Avenue St.
Laurent du Var, Djibouti
Tel: +253-35-2751
Fax: +253-35-6288
E-mail: bndj@intnet.dj
Website: www.banque-centrale.dj

41

Egypt
MEDITERRANEAN SEA

2009 at a glance

Dumy-atB-ur Sa'id

Al-Iskandar-yah

Population (mn)

83.0

Population growth (annual %)1.8

Official language

Le Caire
Cairo

Al-Jizah

As-Suways

ArabicEgyptian Pound (EGP)

GDP (Current US$ bn)

167.4

GDP growth (annual %)4.0

GDP per capita (Current US$)2,016.8

Total Debt (US$ bn)

31.7

Total Debt/GDP (%)

18.9

CPI (annual %)9.9

Exports of Goods and services (% of GDP)

29.4

Gross Official Reserves (in US$ bn)

31.9

Gross Official Reserves (in months of imports)

6.4

EGP / 1USD (Year end)

5.484

RED SEA

EGYPT
LIBYA

Currency

Asw-anSUDAN

B-ur S-ud-an
DunqulahSource: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-Term

Local Currency

Foreign Currency

Fitch

BBB-

BB+

Moody’s

Ba1

Ba1

S&P

BBB-

BB+

Source: Bloomberg

Summary»» In 2005/06, the Government of Egypt embarked on an ambitious financial sector reform programme with African

Development Bank and World Bank support to raise competitiveness and increase private sector involvement.
»» The fixed income market in Egypt is not very diversified in terms of issuers and investors.
»» The Ministry of Finance publishes indicative daily bond yields using four different maturity bonds: 2011, 2013,2015 and 2018. The longest available maturity is 2025.
»» Treasury bills are auctioned on a weekly basis»» The corporate bond market has issues with maturity up to eight years.
»» Bloomberg and Reuters codes for market data:• Bloomberg: CBEG
• Reuters page: 0#/EGCORP=CA.

44

Egypt

 Monetary Policy and Money Market
Monetary Policy
The main objective of the Central Bank of Egypt (CBE) is
price stability. The overnight interest rate on interbank
transactions is the main operational target of CBE’s open
market operations. The Monetary Policy Committee (MPC)
is responsible for setting this rate. In addition, a Coordinating Council was established in 2005 and its members
include the Ministers of Finance, Planning and Investment,
the CBE Governor and his two deputies, and six memberswith international expertise in economic, banking andfinancial affairs. The Coordinating Council determines
monetary policy targets such that price stability objectives
are harmonized with the general economic policy of theState. The CBE also conducts deposit auctions to absorb
excess liquidity in the market.
The Central Bank plans to adopt an inflation targeting
policy in the near-medium term. This will further enhance the predictability and transparency of monetary
policy in Egypt.

 Fixed Income Market
The fixed income market in Egypt is dominated by Government issuance. In recent years, the number of corporate
issues in both securitized and non-securitized form has
increased, but Government securities still represent thebulk of total bond issuances, as seen in the chart below.

Treasury bills are issued for 91, 182, 259, 266, 273, 350,
357 and 364 days. Treasury bill auctions are conducted
on a weekly basis through primary dealers. An issuancecalendar is published quarterly by the Ministry of Finance,
providing information on debt issuance and auctions.

Holdings by type of security as at 2008 (in percent)

The Government also issues Treasury bonds of various
tenors , with the longest outstanding maturity due in
2025. This 20-year bond had a 3.5 bid-to-cover ratio at
issuance in 2005.

Securitized Bonds, 2%

Eurobonds,
14%

Corporate Bonds, 4%Government Bonds,
80%

The Government of Egypt also issues development bonds
and housing bonds. These instruments raise financing
capital for specific projects. They represent a very small
share of the overall market.
The graph below illustrates the Government securities
yield curve.

Source: Egyptian Stock Exchange, Annual Report, 2008

Government securities yield curve as at 21 April
2010
15

Despite the limited number of available instruments, themarket offering is relatively sophisticated. Local investors are exposed to various bond structures including
amortizing, bullet, and callable structures with fixed andfloating coupons.

12

Government Securities
As of March 2009, the Government had issued bonds
with a cumulative value of EGP 9.2 billion and bills witha value of EGP 74 billion.1

930-day 60-day 91-day 182day

273daySource: Central Bank of Egypt
1

Central Bank of Egypt, 2009.

364day

3
years

5
years

7
years

Egypt45

Non-Government Securities

Intermediaries

The number of corporate issues available in Egypt is small
and fairly short-dated. The longest instrument has a maturity of eight years (2017), as seen in the table below.2

Government bonds and bills are dealt by primary dealers.
Primary dealers are underwriters in the primary market.
They currently include 15 banks out of the 39 operatingin Egypt.

Given the limited offering, banks play a major role in theintermediation of corporate credit. As a result, there issignificant room for growth in corporate issuance.
List of non Government securities
Bond Name

Issue

Maturity

Issue CurValue rency(mn)Contact – 4th Issue

Dec 08Dec 1339

L.E

Contact- 2nd Issue

Dec 06

Dec 1149

L.E

Contact-3rd Issue

Dec 07

Dec 12170

L.E

Egyptian Arab Land
Bank-Securitization
Bonds-2nd Issue

Aug 07 Aug 17

710

L.E

Egyptian Arab Land
Bank-Securitization
Bonds-1st Issue

June 06 June 13

500

L.E

Egyptian Securitization Company

April
08

267

L.E

El Ezz Stell Rebars2nd Issue

June 08 Dec 14

1,100

L.E

Golden Pyramids
Plaza

Aug 07 June 14

1,567

$

Telecom Egypt –2nd Tranche

Feb 05

Feb 10400

L.E

Telecom Egypt – 1stTrancheFeb 05

Feb 10400

L.E

Dec 12

Investors
The investor base is narrow. Institutional investors havethe predominant market share, accounting for 99% of
the total value traded of outstanding Government andcorporate bonds.3 Furthermore, commercial banks are
the most active institutional investor.
Social insurance funds and the Post Office are the largest
savings institutions in the country. Egypt has two social
insurance funds, one for public and the other for private
sector employees. In addition, there are more than 20
insurance providers in Egypt. The social insurance andpension funds, estimated at EGP 272 billion in 2008, areinvested in infrastructure projects, treasury-guaranteedbonds and National Investment Bank (NIB) bonds.
The participation of retail and foreign investors is still
negligible.

Secondary Market
In the secondary market, primary dealers are market
makers conducting transactions for their own accounts.
They also act as brokers buying/selling securities on behalfof their clients.

Source: Website, Egyptian Stock Exchange, December 2009.
3
2

Egyptian stock exchange, data from Jan 2009 to Aug 2009

Bond issued by Al Taamer Securitization Company

Foreign Exchange Market
After more than a decade in a crawling-band regime, theEgyptian Pound has followed a managed float since 2003.
The volume of transactions in the dollar interbank market
reached USD 19.4 billion during the period from July to
December 2009.4 Sales by public banks reached roughly
20% of the total volume of transactions, with purchases
at approximately 3%. Privately-owned banks’ sales andpurchases accounted for the remaining transactions.

market of up to 1 year, although most liquidity is within
the 3-month tenor.
The graph below provides historical levels of the EGP
against the USD.

Both the current account and capital account are liberalized.

7

An interbank spot and forward market is active onshore up
to 1 year, but any conversion of EGP into hard currency
must be linked to commercial or investment transactions. There is a small offshore non-deliverable forward

EGP per Unit of USD (Year End)
8

6

5

4

Central Bank of Egypt Economic Review 2008/09

Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

46

Egypt

Derivatives Market
The interest rates derivatives market is still at an embryonic stage. The CBE restricts the use of interest rate

swaps. Product offering consists mainly of FX swaps andforwards, with maturities not longer than three years.

Regulation and Taxation
Regulation
The Egyptian Financial Supervisory Authority (EFSA)
replaced the Capital Markets Authority in July 2009. The
EFSA is responsible for supervising the non-bank financial
institutions, instruments and markets. This includes the
Capital Market, the Stock Exchange, all activities related
to insurance services, mortgage finance, financial leasing,factoring and securitization.
The legal framework of capital markets in Egypt is basedon several laws and regulations: the Capital Market Law
and its Executive Regulations, the CMA board of directors’
decrees and Depository, the Central registry Law and its
Executive Regulation, listing and delisting rules and theCASE membership rules5
The Central Bank of Egypt is responsible for overseeing
the banking system.
5

The offering of corporate bonds is subject to prior approval
from EFSA. There are various administrative/regulatory
procedures associated with obtaining regulatory approval
for issuing and listing securities.

TaxationInterest on bonds listed in the Egyptian Stock Exchange
is exempt from tax.
Capital gains are not taxable, but accrued interest is subject to 20% tax. Interest on corporate bonds is exempt
from taxes.
Egypt has tax treatries with the United States of America
and the United Kingdom. Investors from these markets
are charged with a tax rate of 15% instead of the default
rate of 20%.

EFSA website

Clearing and Settlement
The settlement system is based on delivery versus payment. A clearing house – Misr for Central Clearing, Depository and Registry – supports the settlement of equities,
corporate and Government debt that are traded on thestock exchange. Treasury bills are cleared and settled by
the CBE.

The settlement cycles are as follows:»» T+0 for securities traded by the Intra-day Trading

System»» T+1 for Government bonds that are traded throughPrimary Dealers System»» T+2 for all other securities

Egypt47

Regulatory Contacts
Central Bank of Egypt

The Egyptian Exchange (EGX)

54 Elgomhoreya Street
11511, Cairo Egypt
Tel : +202 27702770/ 27701770 / 25976000
Emails: info@cbe.org.eg
Website: www.cbe.org.eg

4A, El Sherifien St., Postal Code 11513
P.O. Box 358 Mohamed Farid, Downtown, Cairo
Tel: (202) 23928698 / 23921402 / 23921447
Fax: (202) 23924214
Website: www.egyptse.com

Eritrea
2009 at a glance
Population (mn)

5.1

Population growth (annual %)2.9

Official language

RED SEA

Tigrinya

Currency

Nafka (ERN)

GDP (Current US$ bn)

1.6

GDP growth (annual %)3.6

GDP per capita (Current US$)

309.8

Total Debt (US$ bn)

0.9

Total Debt/GDP (%)

57.9

CPI (annual %)34.7

Exports of Goods and services (% of GDP)

3.4

Gross Official Reserves (in US$ bn)

0.1

Gross Official Reserves (in months of imports)

2.8

ERN / 1USD (Year end)

SUDAN

ERITREA
Mitsiwa
AsmeraGULF OF ADENETHIOPIA

MekeleAseb

DJIBOUTI
Bahir Dar

15.0000

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P

Summary»» The fixed income market in Eritrea is in its infancy with very limited issuance, trading and sophistication.
»» The Government of Eritrea issues Treasury bills out to 180 days with pricing fixed by the Central Bank of Eritrea.
»» There is no auction of Government securities and no issuance of corporate bonds.

Djibouti

SOMALIE

50

Eritrea Monetary Policy and Money Market
The Central Bank of Eritrea implements monetary policy
with three instruments, namely open market operations,the discount rate, and required reserves. Due to limited

interbank money market trading liquidity, required reserves play a vital role as a monetary policy operating tool.

 Fixed Income Market
Government Securities
Treasury bills with maturities of 180 days are issued by
the Central Bank on behalf of the Government. These bills
are not auctioned and the price is fixed by the Central
Bank. The proceeds are used to finance the fiscal budget.

Non-Government Securities
There are no corporate issuances in Eritrea.

Intermediaries
So far, there are no distinct market makers, brokers or
primary dealers.

Investors
The financial system of the country consists of the Bankof Eritrea (BE) which is the Central Bank, the Commercial
Bank of Eritrea (CBE) with 17 branches, the Housing andCommerce Bank of Eritrea (HCBE) which has 10 branches,

the Eritrean Investment and Development Bank (EIDB)
with 3 liaison offices, the National Insurance Corporationof Eritrea (NICE) and Himbol Exchange and Financial
Service – a financial auxiliary that provides money transfer
and foreign exchange services.
The banks are all majority-owned by the Government,
while the National Insurance Corporation of Eritrea (NICE)
was sold in 2004 to Eritrean investors and converted intoa privately held company. Created in 1991, NICE has 57 %of its business in the motor insurance sub-sector. While
the Commercial Bank of Eritrea has correspondent banking relations with many international banks, no foreign
financial institutions operate in Eritrea.

Secondary Market
There is no secondary market trading in Treasury bills.

 Foreign Exchange Market
The Eritrean Nakfa (ERN) is a conventional peg currency.
The Nakfa is pegged to the US dollar at a rate of ERN 15
per 1 USD. A dual exchange rate system existed in the
country and there was a substantial difference between
the official and parallel market rates until 2005. Officialtransactions and other priority needs were conductedin the official market, while the vast majority of privatetransactions, including bona fide current account transactions, were channelled through the parallel market. Since
January 2005 the exchange rate structure is unified andonly the official exchange market exists. Black market
trading in foreign currency is illegal and there are limits
to possession and exchange of foreign currency.

The graph below provides historical levels of the ERN
against the USD.
ERN per Unit of USD (Year End)
15

14

13

12

Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Eritrea51 Derivatives Market
There is no derivatives market.

 Regulation and Taxation
Regulation

Taxation

The banking and insurance sectors are regulated by theSupervision Department of the Central Bank of Eritrea.

There are no taxes on the securities that are issued.

 Clearing and Settlement
The Accounts Department of the Bank of Eritrea carries
out the clearing and settlement function for Government Regulatory Contacts
Bank of Eritrea
P.O.Box 849, Nakfa Street
Asmara, Eritrea
Tel: +291-1-123033/123036
Fax: +291-1-122091
E-mail: kibreabw@boe.gov.er

securities. Securities are held in physical form only.

Ethiopia
2009 at a glance
Population (mn)

82.8

Population growth (annual %)Amharic

Currency

Birr (ETB)

GDP (Current US$ bn)

29.9

GDP growth (annual %)6.2

GDP per capita (Current US$)

361.7

Total Debt (US$ bn)

4.4

Total Debt/GDP (%)

14.7

CPI (annual %)35.3

Exports of Goods and services (% of GDP)

8.3

Gross Official Reserves (in US$ bn)

N/A

Gross Official Reserves (in months of imports)

N/A

GULF OF ADEN
Gonder

2.6

Official language

ETB / 1USD (Year end)

MekeleSUDANDJIBOUTI
Bahir Dar

Djibouti
Dese

Debre Markos
Dire Dawa
Addis Ababa
Jima

Akaki Beseka
NazretHarer

Hargeysa

SOMALIA

Asela
Awasa

ETHIOPIAKENYA
UGANDA

12.7029

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» The Government securities yield curve has the longest tenor at 182 days.
»» T-bill auctions are announced two weeks before auction.
»» Significant negative real interest rates affect the demand for Government securities.
»» Government bonds are not issued regularly and are for specific purposes/projects.
»» The Government is conducting studies under the Financial Sector Capacity Building Project with a view to de-veloping a strategy and regulatory framework for the development of capital markets.

ATLANTIC
OCEAN

54

Ethiopia Monetary Policy and Money Market
Monetary Policy

Money Market

The National Bank of Ethiopia (NBE) is responsible formonetary policy management and this function is discharged in close coordination with the Ministry of Finance& Economic Development (MoFED) to ensure coherence between fiscal and debt management policies andmonetary policy. A high level Committee comprising the
National Bank of Ethiopia and MoFED has been set up
to monitor liquidity requirements. The goal of monetary
policy is to achieve price stability and foster growthwithin a stable macro environment. The operating target
for monetary policy is money supply. There is a needto shift towards more market-oriented instruments formonetary policy through deepening of the T-bill market,
developing a bond market, market-determined interest
rates and increasing competition in the banking sector.

The interbank money market in Ethiopia is not well developed; there are very few participants and the volumeof transactions is small. As an illustration, there were nointerbank money market transactions during the third
quarter of financial year 2008/09 and the first quarterof financial year 2009/10. The interbank money market
was established in 2001. Since then, the market has beenhighly illiquid, and as a result, it does not discharge its
function of setting benchmark interest rates effectively.
This, in turn, limits the range of indirect instruments
for liquidity management. The limited development of
the interbank money market has partly been caused byexcess liquidity in the banking sector.

Fixed Income Market
Government Securities
Treasury bills are issued for 28-, 91 and 182-day tenors.
Auctions are held every fortnight and access to T-bills
is open to banks, non-bank institutions, and the public.
Government bonds are issued only for specific purposes,
hence the irreguar issuance pattern and the absence of aformal Government bonds market. As of 31 March 2009,
ETB 8.1 billion worth of Treasury bills was outstanding.

Non-Government Securities
The Ethiopian market has very few corporate bond issues.
Large public enterprises, such as the Ethiopian Electricity
Power Corporation (EEPCO) and the Ethiopian Telecommunications Corporation (ETC), have issued corporate
bonds in recent years to finance infrastructure investments. In 2009, EEPCO issued a bond with a face valueof ETB 1.6 billion.

held ETB 1.7 billion (approx 20.7% of the outstanding
volume) worth of T-bills. There are 12 insurance companies which together held ETB 86 million of T-bills. The
Social Security Agency held ETB 2,9 billion and public
enterprises held ETB 3.2 billion in T-bills.
The dominance of banks in T-bill auctions appears to bediminishing due to enhanced participation of non-bankinstitutions in the T-bills market. As of 31 March 2009,non-bank investors held ETB 6.4 billion in Treasury bills,
which was 79.3% of the outstanding volume, up from
33.1% a year before.
The National Bank of Ethiopia is a significant investor in
Government securities. The amount of bonds held by the
NBE amounted to ETB 9.2 billion as of 31 March 2009.

Intermediaries

Foreign investor participation is constrained by existinglaws which do not allow foreign investors to invest in
Government securities.

Treasury bills are issued to investors who hold them tomaturity. There are no intermediaries in the issuance process and the secondary market. Once the instruments arepurchased from primary sources, Government and corporate bonds are kept until maturity. There are no brokers.

Retail investors apply directly to the NBE for investment
in Government securities and hold individual accounts on
the central depository. The minimum bidding amount for
TBs is ETB 50,000 (approximately USD 4,000).

Investors
The banking sector is comprised of 13 banks and dominated by the Commercial Bank of Ethiopia, the state-owned
commercial bank. As of 31 March 2009, commercial banks

Ethiopia

55

Foreign Exchange Market
The Ethiopian Birr (ETB) is a managed floating currency.
Before May 1993, the Birr was pegged to the US Dollar andfrom May 1993 to July 1995 there was a dual exchange
rate system, the official and auction rates. The rates havenow been unified and a marginal rate (official rate) isdetermined through weekly auctions. All transactions inforeign exchange must be carried out through authorized
dealers under license from the National Bank of Ethiopia.

The interbank foreign exchange market is rather small,with the market being dominated by the state-owned
Commercial Bank of Ethiopia.
The graph below provides historical levels of the ETB
against the USD.
ETB per Unit of USD (Year End)
15

All payments abroad require licenses issued by the Controller of Exchange. Furthermore, exports are licensed by
the Controller to ensure the surrender of foreign exchange
proceeds, and shipments require permits issued by thesame office. Foreign exchange payments, transfers andaccounts must adhere to capital account restrictions thatare in place.

12

9

6

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg

Derivatives Market
There are no interest rate or currency derivatives in Ethiopia.

Regulation and Taxation
Regulation

Taxation

The National Bank of Ethiopia regulates the banking andnon-bank sectors of the economy, including the insurancecompanies. All aspects of the capital markets are also
under the supervision of the NBE.

Interest income on Government securities is exempt
from tax.

Clearing and Settlement
The National Bank of Ethiopia manages the clearing andsettlement system. The infrastructure for electronic clearance and settlement is not well developed.

56

Ethiopia

Regulatory Contacts
National Bank of Ethiopia
P. O. Box 5550
Tel: 251 11 551 7430
Fax: 251 11 551 4588
E-mail: nbe.edpc@ethionet.etWebsite: www.nbe.gov.et

The Gambia
2009 at a glance
Population (mn)

1.7

Population growth (annual %)2.7

Kaolack

SENEGAL
Tambacounda

Official language

EnglishCurrency

Dalasi (GMD)

GDP (Current US$ bn)

0.6

GDP growth (annual %)3.3

GDP per capita (Current US$)

323.4

Total Debt (US$ bn)

0.3

Total Debt/GDP (%)

57.4

CPI (annual %)5.5

Exports of Goods and services (% of GDP)

49.1

Gross Official Reserves (in US$ bn)

0.2

Gross Official Reserves (in months of imports)

6.4

GMD / 1 USD (Year end)

26.75

ATLACTICOCEAN

GAMBIA

BanjulSENEGAL

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: AfDB, Bloomberg

Summary»» The Government securities yield curve has a longest maturity of 3 years.
»» Benchmark points and issues along the Government securities yield curve are 91-day, 182-day, 364-day and 3-years.
»» Sharia-compliant instruments, Sukuk-Al-Salam, are also issued as monetary policy instruments.
»» Gambian authorities completed the preparation of a medium-term debt strategy (MTDS) in September 2009.
»» Limited secondary market trading.

58

The Gambia Monetary Policy and Money Market
The Central Bank of Gambia (CBG) focuses on reserve
money as the operational target to contain growth inbroad money and inflation. Other important tools formonetary policy implementation are the rediscount rateand sales of T-bills.

Given the higher costs associated with issuance of T-bills
for sterilization of donor-induced inflows under budget
support, the current strategy is to prioritize foreign exchange sales as the monetary policy tool.

 Fixed Income Market
Government Securities

Investors

Gambia Treasury Bills are issued in tenors of 91 day,182 day and 1 year. Access to T-bills is open to primary
dealers only, except for subscriptions of GMD 5 million
and over. Auctions are held weekly on a Wednesday andsettlement is done on a T+3 cycle.

The banking sector has benefited from recent regional
expansion by banks from West and Central Africa. This
has led to an increase in the number of banks in Gambia
from 8 in 2007 to 12 at the end of March 2009, comprising
1 Islamic bank and 11 conventional commercial banks.
Commercial banks are the main investors in Government
securities as can be seen from the chart below.

Government Sukuk-Al-Salam (SAS) is a Sharia-compliant
Government security issued by the Central Bank on behalfof the Government. Two parties agree to trade a notional
asset spot and at predetermined and prepaid prices. The
Central Bank sells gold to issue SAS, which it buys backat a predetermined price in the future. Tenor is 91-day
and the minimum amount for investment in SAS is GMD
25,000 and is in multiples of GMD 5,000.
The 3-year Gambia Government bond had its maiden
issue on 24 February 2010. Access to T-bond auctions
is open to all investors and settlement is done on a T+1
cycle. The prospectus indicates quarterly issuance; theminimum bid is initially GMD 5 million with multiplesof GMD 50,000 thereafter.
The graph below illustrates the Government securities yield
curve. There was no available data for the 3 year bond.

The insurance sector has 11 insurance companies operatingin the country, 8 of which offer only non-life products,
while 3 offer both life and non-life products.
Holdings by category of investor as at June 30,
2009 (in percent)

Others14%

Pension funds
17%

Commercial Banks
69%

Government securities yield curve as at March 16,
2010
Source: Central Bank of The Gambia

20

Primary Market
Treasury bills are primarily used to conduct open market operations. They are issued on a weekly basis, on a
Wednesday, or as may be determined by the CBG, which
publishes a tentative issuance calendar. Current initiatives
under consideration are to adopt fortnightly auctions andcease weekly auctions.

15

10

5

91-day15 july 2008

182-day

364-day

9 june 2009

Source: Central Bank of The Gambia

16 march 2010

91-day(SAS)

Since 2002, a weekly auction of Treasury and Central Bank
bills replaced the fotnightly auction system. The Central

The Gambia

Bank determines which bids to accept after closing time.
Bills are sold through multiple price auctions and successful competitive bidders are awarded Treasury bills atyield that equals the price they submit, and those with
non-competitive bids are awarded the securities at theweighted average clearing price.

59

Secondary Market
There are eleven approved primary dealers in Government
bills auctions. Trading takes place over-the-counter andsettlement is on a T+1 cycle. There is limited secondary
market trading in Gambia Treasury bills.

Foreign Exchange Market
The CBG implements a floating foreign exchange policy
while limiting interventions to smooth market volatility.
The foreign exchange market is an avenue for monetary
policy intervention and requires that there are sufficient
reserves to meet the import cover and sterilization. The
comfortable level of international reserves, achieved largelyby the SDR allocation, strengthens the CBG’s position to
be able to cushion the economy against external shocks.
Residents and non-residents may hold foreign exchange
accounts and repatriation of profits by non-residents andforeign-owned firms is permitted.

The graph below provides historical levels of the GMD
against the USD.
Average GMD to the USD
30

25

20

2004

2005

2006

2007

2008

2009

Source: Central Bank of The Gambia

Regulation and Taxation
Regulation

Taxation

The CBG is the regulator of the banking and insurance
sectors.

There are no withholding taxes for either residents ornonresidents. Treasury bills are not taxable; however,there is a 3% fee for rediscounting bills before maturity.
Tax treaties exist with Norway, Sweden, Taiwan and theUnited Kingdom.

Clearing and Settlement
Clearing and settlement for T-bills and T-bonds is at a T+1
cycle and investors hold individual accounts for securities
holdings with the central registry at the Central Bank.

60

The Gambia

Regulatory Contacts
The Central Bank of the Gambia
No. 1/2 Ecowas Avenue, Banjul, The Gambia
Tel: +220-4-228103/227633
Fax: +220-4-226969
E-mail: info@cbg.gm
Website: http://www.cbg.gm

Ghana2009 at a glance

Bobo-Dioulasso

Population (mn)

23.8

Population growth (annual %)2.1

Official language

BENIN

EnglishTamaleCedi (GHS)

GDP (Current US$ bn)

15.5

GDP growth (annual %)4.5

GDP per capita (Current US$)

649.9

Total Debt (US$ bn)

7.3

Total Debt/GDP (%)

47.1

CPI (annual %)15.1

Exports of Goods and services (% of GDP)

46.3

Gross Official Reserves (in US$ bn)

2.6

Gross Official Reserves (in months of imports)

2.7

GHS / 1USD (Year end)

IVORY COAST

TOGO

Currency

GHANA
Kumasi
Lomé
Abidjan

Accra

Sekondi-Takoradi

ATLANTIC OCEAN

1.4317

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

B+

B+

Moody’s

Not rated

Not rated

S&P

B+

B+

Source: Bloomberg

Summary»» Weekly auction of Government securities.
»» The Government securities curve has a longest maturity of 3 years.
»» Full automation of trading processes on the Ghana Stock Exchange (GSE) accompanied by a GSE Central Securi-ties Depository (GCSD) to record all security holdings in electronic format.
»» Bloomberg and Reuters codes for market data:• BOGH• AFHO

62

Ghana Monetary Policy and Money Market
The Bank of Ghana (BoG) has gone through several monetary management frameworks aimed at maintaining pricestability in the Ghanaian economy. As part of the policy
measures to improve monetary policy formulation further,a new BoG Act was enacted in 2002. This regulatory
framework refocused the main objective of the Bank to
its core function of promoting price stability and guaranting the operational independence of the Central Bank.
The Act also established a Monetary Policy Committee(MPC) to formulate monetary policy. The MPC was established in 2002 and meets bi-monthly to analyze a broad
range of economic data on all sectors of the economy. This

subsequently informs the Committee’s determination of
the level of the key policy rate, the prime rate, which sets
the stance of monetary policy. The MPC process gradually
paved the way for the formal adoption of Ghana’s Inflation
Targeting (IT) monetary policy framework in May 2007.
The prime rate serves as the main rate at which theCentral Bank transacts business with the commercial
banks. As the main operational instrument, the prime rate
also influences the short-term money market rates, themedium-term rates for open market operations, and thedeposit money banks lending and deposit rates. At theoperational level, the Repo rate is linked to the prime rate.

 Fixed Income Market
Government Securities
Weekly auctions are held by the Wholesale Auction Committee (comprising the Bank of Ghana, the Ministry of
Finance, the Controller and the Accountant General’s
Department) on Fridays for the sale of Government bills
and bonds to primary dealers (PDs). Issuance of Treasury
bills is via a multiple price auction, while Treasury notes
are issued via a uniform price auction. The minimum
bidding amount is approximately GHS 10,000 and bids
are submitted on either a competitive or non-competitive
basis. Approved bids are accepted and equivalent yieldrates are paid for by PDs.

The Bank of Ghana (BoG) issues bills with maturitiesof 2 weeks, 1 month and 2 months intermittently formonetary policy purposes.
Government securities yield curves as at 30 June
2009, 30 June 2008 and June 30 200730

Yield %

25
20
15

Treasury bills auctions are held weekly on Fridays by the
Bank of Ghana. The tenors issued are 91day, 182-day and
1-year Treasury note. Access to Treasury bills is open to
the public through licensed primary dealers and settlements occurs at T+1.

10

Government bonds are issued for 2 and 3-year tenors, withboth fixed and floating rate options. The 2-year floating
rate note has an interest rate that is tied to the 91-day
Treasury bill rates, while the 3-year floating rate has aninterest rate spread over the 182-day T-bill rate. The 5-yearbond was issued by the Government in early 2007, andis the Government security with the longest term. The
graphs opposite illustrate the Government securities yield
curve and the maturity profile of Government issuance.

Source: Central Bank of Ghana

Pre-auction information on the desired financing target,
along with the desired split between short and mediumterm instruments, is provided a week in advance.

5

91-days

182-days

364-days

2 yrfixed

3 yrfixed

5 years
Tenor

June 30, 2009

June 30, 2008

June 30, 2007

Maturity profile of Government of Ghana
securities as at June 30, 2009
2500
2000
1500
1000
500
0

0 to 1 year

Source: Central Bank of Ghana

1 to 3 years

3 to 5 years

GhanaNon-Government Securities
There are two listed corporate bonds on the Ghana Stock
Exchange issued by two financial institutions, namely,
HFCBank and Standard Chartered Bank (Gh.) Ltd.

Intermediaries
The securities market in Ghana has licensed approximately 34 primary dealers, which includes banks andnon-bank financial intermediaries such as discount houses
and brokerage firms. Bids may be submitted either on acompetitive or non-competitive basis through primary
dealers only.

Investors
The banking sector consists of 27 licensed banks. Commercial banks held 27.4% of outstanding Government
securities as of 30 June 2009, as seen in the chart opposite.
The BoG holdings of Government securities was GHS 2.1
billion as of August 2009, which represented 39.9% of thetotal outstanding volume.
Holdings of Government securities by insurance companies
amounted to GHS 48.5 million, while Social Security andNational Insurance Trust (SSNIT) Pension Fund holdings
were GHS 0.3 billion as of August 2009, representing 0.9%
and 5.1% respectively of the total. The minimum capitalrequirement for an insurance company has been raised
to the Ghana Cedi equivalent of USD 1 million.
The Government securities holdings by firms and institutions, including fund managers, was GHS 0.3 billion as ofAugust 2009, representing 5.6% of the total.
In December 2006, the new Foreign Exchange Act 2006
came into effect, allowing foreign investors to bid for securities issued by the Government of Ghana. Non-residents
are allowed to invest in the long-end of the domestic
capital market, with tenor of three years and above. To
facilitate this, non-residents are permitted to maintainforeign currency accounts with domestic banks, which
can be credited with transfers in foreign currency fromabroad or other foreign currency accounts. This development resulted in a strong foreign investor participationin the Government’s 5-year bond issue in January 2007.

63

Retail investors are very active investors in Government
securities and their holdings as of 30 June 2009 were 19%.
The Central Depository Act 2007 requires all investors tohold individual accounts at the central depository. They
may submit bids for Government securities through primary dealers or in the secondary market through brokers
on exchange.
Holdings by category of investor as at June 30,
2009 (in percent)Individuals
19%

Foreign Investors
8%

Central Bank
40%

Commercial Banks
27%

Insurance Cos. 1%

Pension Funds 5%

Source: Central Bank of Ghana

Secondary Market
Secondary market trading of Government securities used
to take place over-the-counter through a network of primary dealers. However, in response to the shortcomingsof an illiquid bond market, the Government listed all
outstanding 2 and 3-year bonds, both floating and fixed,on the stock exchange in 2006. The 5-year bond was also
listed on the exchange in 2007 in a bid to enhance secondary trading activities to increase liquidity. The secondary
aim of the Government was to provide benchmark securities for corporate issuers and deepen the bond market.
The listing also provides enhanced access for investors
to bid for securities, rather than submitting bids throughlicensed primary dealers.

64

Ghana

 Foreign Exchange Market
The enactment of the Foreign Exchange Act 2006, paved
the way for partial liberalization of the capital account.
Ghana operates a flexible exchange rate regime, withoccasional Central Bank intervention in the event ofexcessive short-term volatility.
The exchange rate is determined through the interbank
foreign exchange market on the basis of average rates
as reported by authorized dealers and foreign exchange
bureaus on a daily basis. The Central Bank occasionallyparticipates in the interbank market to smooth foreignexchange liquidity conditions.
The 1994 Investment Code guarantees the free transferability of dividends, loan repayments, licensing fees andcapital. Residents and non-residents may hold foreignexchange accounts in Ghana.

The graph below provides historical levels of the GHS
against the USD.
GHS per Unit of USD (Year End)
1,5

1,2

0,9
Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg Derivatives Market
Ghana does not have an interest rate or currency derivatives market. In the medium to long term, enhanced

liquidity in the foreign exchange market may lead to thedevelopment of foreign exchange derivative instruments.

 Regulation and Taxation
Regulation
The Legal Framework underpinning operations of thecapital market is embodied in the Securities Industries
Law and the Securities Amendment Act . These laws
authorize the Securities and Exchange Commission (SEC)
as the apex supervisory and regulatory body of securities
market operations in Ghana.
The Bank of Ghana has overall supervisory and regulatory
authority in all matters relating to banking and non-bankfinancial business with the purpose of achieving a soundand efficient banking system in the interest of depositors
and the economy as a whole.
The pension sector has undergone significant reforms
that will be fully implemented in 2010. The supportive
legal framework i.e. the National Pensions Act, 2008 will
establish an independent National Pension Regulatory
Authority (NPRA) to regulate, supervise and monitor
both private and public pension schemes in the country.
Established by the Insurance Act, 2006, the National
Insurance Commission (NIC) provides oversight respon-

sibilities for the insurance sector. The regulators’ overall
objective is to ensure effective administration, supervision, regulation, monitoring and control of the businessof insurance, to protect insurance policyholders and theinsurance industry.
Custodians are appointed to hold the certificate of title
to any security issued in Ghana. They are licensed andregulated by the Securities and Exchange Commission(SEC). Currently, there are four licensed custodians.

Taxation
A withholding tax rate of 10% is applicable to interest
income for resident corporations. A temporary exemption
on capital gains on securities listed on the Ghana Stock
Exchange is also in force and expected to last until 2010.
Ghana has double tax treaties with the United Kingdom,France, South Africa and Italy. Interest paid to a nonresident investor in bonds issued by the Government of
Ghana is exempt from tax. Capital gains made on disposalof listed securities are tax exempt until November 2010.

Ghana65

Clearing and Settlement
The Bank of Ghana has established an efficient and safe
payment and settlement system. A modern payments andsettlement infrastructure that includes a Real Time Gross
Settlement System (RTGS), a Central Securities Depository(CSD), as well as a Cheque Codeline Clearing with Cheque
Truncation System was developed to enable secure andinstantaneous settlement of payment orders, clearing andsettlements of equity and debt instruments, and to record
holdings of all securities (Government securities, equities
and corporate bonds etc.) in electronic form.
The establishment of a National Switch (e-zwich) in 2008
provided a common platform for all payment transactions conducted by both the “banked” and “unbanked”
segments of the population, thereby further enhancing
Ghana’s payments systems.

The GSE Securities Depository Company Ltd (GSD)
provides the platform to facilitate electronic clearing,
settlement and electronic book-entry of ownership ofindividual securities, enhancing the transfer of tradedsecurities and enabling easy accessibility of securities
information by type, tenor, holder and currency categorization in a more efficient manner.
The implementation of a real time gross settlement
system, the Ghana Inter-bank Settlement system, hasprovided a platform for prompt settlement of Government securities transactions generated by the Central
Securities Depository (CSD). Settlement of Government
securities is at T+1 and through Central Bank clearing.
Custodial accounts are held on an individual basis.

Regulatory Contacts
Bank of Ghana

Ghana Stock Exchange

P. O. Box GP 2674, Accra – Ghana
One Thorpe Road, High Street, Accra – Ghana
Tel:+233-21-666174-6/666361-5/666902-8/666921-5
Fax: +233-21-662996
E-mail: bogsecretary@bog.gov.gh
Website: www.bog.gov.gh

P. O. Box 1849, Accra – Ghana
4th Floor, Cedi House, Accra – Ghana
Tel: +233-21-669908/14/35, 664715
Fax: +233-21-669913
Website: www.gse.com.gh

Securities and Exchange Commission

P. O. Box CT 3456, Accra—Ghana
Insurance Place, Independence Avenue, Accra – Ghana
Tel: +233-21-238300-1
Fax: +233-21-237248
Email: admin@nicgh.org
Website: www.nicgh.org

P. O. Box CT 6186, Cantonments, Accra – Ghana,No. 30, 3rd Circular Road, Cantonments, Accra – Ghana,Tel: +233-21-768970-2
Fax: +233-21-768984
Website: www.secghana.org

Ghana National Insurance Commission

Guinea2009 at a glance

GAMBIA

Population (in millions)

10.0

Population growth

2.4

Official language

FrenchCurrency

SENEGAL

BamakoGUINEA

Guinean Franc (GNF)

GDP (Current US$ bn)

4.5

GDP growth (annual %)0.7

GDP per capita (USD)

448.7

Fria

2.9

External Debt/GDP (%)

63.6

KankanKindiaConakry

Freetown

External Debt (US$ in bn)

MALI

SIERRA
LEONE

Nzérékoré
IVORY COAST

ATLANTIC OCEANCPI annual %12.3

Exports of Goods and services (% of GDP)

21.1

Gross Official Reserves (in US$ bn)

0.2

Gross Official Reserves (in months of imports)

1.2

GNF / 1USD (Year end)

4,997

LIBERIAMonrovia

Source: AfDB, Bloomberg, BCRG

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» The Government securities yield curve extends to 182 days.
»» Investor base; dominated by commercial banks.
»» Weekly Auctions of Treasury bills.
»» No secondary market activities.
»» Reform of the Central Bank aimed at achieving more autonomy in the designing and implementation of mon-etary policy.
»» Modernization of payment systems in 2009 is aimed at fostering financial sector development.

68

Guinea Monetary Policy and Money Market
Monetary Policy

Money Market

Established in 1960, the Banque Centrale de la Républiquede Guinée (BCRG) formulates and implements monetary
policy through open market and Repo operations. BCRG’s
main instruments are the “Titres de Regulation Monétaire”(TRM), T-bills and minimum reserve requirements for banks.

The main instruments in the Guinean money market
are Treasury bills (T-bills) and the “Titres de Regulation
Monétaire” (TRM). However, due to the low level ofinflation recorded during the first four months of 2009(2.2% on average compared to the single digit inflation
target of end of year), this reduced the necessity to mop
up liquidity. T-bills and TRMs issues were suspended
in May and June 2009, respectively. As a result, theonly market activity at present is the redemption ofexisting debt.

Following policy reforms implemented in 2009, whichstrengthened the autonomy of the BCRG, inflation targeting is now the main policy objective. The BCRG uses themonetary base as an operating target.
Advances to Treasury are strictly limited to the statutory
threshold of 5% of the average tax revenue for the last
three years.

 Fixed Income Market
Government Securities

Investors

Ordinarily, the fixed income market comprises mainly
Treasury bills (“Bons du Trésor” – BTD), with maturities
ranging from 14 to 182 days. They are issued by the National Treasury on a weekly basis with tenors of 14, 28,
42, 91 and 182 days.

Nine commercial banks and four insurance companies
are the main primary dealers of T-Bills and TRM. As ofJune 2009, commercial banks held more than 80% of theoutstanding securities, as seen in the chart below.

The graph below shows the fluctuation in the Guinean
Government yields curves over the last three years. A
pronounced drop in yields is visible across all maturities
in June 2009.

There is no active secondary market. The outstanding
BTD was GNF 310 billion, GNF 371.8 billion and GNF 830
billion in December 2006, 2007 and 2008 respectively. At
the end of June 2009, the outstanding debt was GNF 693
billion with maturities ranging from 42 days to 182 days.

Government securities yield curve as at 30 June
2009, 2008 and 2007
25%

Secondary Market

Holdings by category of investor as at June 30,
2009 (in percent)

20%
Others,
20%

15%

10%

28-dayJune 30, 200942-dayJune 30, 2008

91-day182-day

June 30, 2007

Commercial Banks,
80%

Source : Banque Centrale de la République de Guinée (BCRG)

Non-Government Securities
There is no corporate debt securities market in Guinea;
commercial banks and insurance companies remain themain source of financing for private entities.

Source : BCRG information note, June 2009

Guinea69 Foreign Exchange Market
The Guinean Franc (GNF) is a free-floating currency. The
exchange rate is determined by the FX interbank market.
The GNF was stable at around GNF 1910 to the dollar
until early 2004, after which it depreciated to GNF 4500
to the dollar by the end of December 2005 and to GNF
4697 as of June 2009.
After the foreign exchange policy reforms implemented
in 2009, the new exchange rate policy aims to gradually
rebuild reserves to meet at least three months of imports
coverage. Subject to a valid Certificate of Capital Importation (CCI), interest and capital gains realized by foreign
investors can be fully repatriated.

The graph below provides historical levels of the GNF
against the USD.
GNF per Unit of USD (Year End)
6000

5000

4000

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: BCRG annual report 2008 & June 2009 information note Derivatives Market
There is no derivatives market in Guinea.

 Regulation and Taxation
Regulation

Taxation

The Central Bank supervises the financial sector which
comprises 13 commercial banks, 9 microfinance institutions, and 5 insurance companies.

Foreign and local investors are treated equally in accordance with the tax laws in effect. There is no difference
in tax rates applied to securities investments by local orforeign investors.

 Clearing and Settlement
The Central Bank is the clearing and settlement house,
as well as the central depository for securities.

 Regulatory Contacts
Banque Centrale de la Republiquede GuinéeB.P 692, Conakry, Guinée Boulevard du Commerce,
Commune de Kaloum, Conakry, Guinea
Tel: +224-30412651
Fax:+224-30414898
Website: http://www.bcrg-guinee.org

Kenya2009 at a glance
39.8

Population growth (annual %)2.6

Official language

English/Kiswahili

Currency

Kenya Shilling (KES)

GDP (Current US$ bn)

41.8

GDP growth (annual %)2.9

ETHIOPIASUDANUGANDA

KENYA

KitaleKampalaSOMALIA

Population (mn)Kakamega
KisumuNakuruEmbu
Thika

1,051.7

Total Debt (US$ bn)

7.3

Total Debt/GDP (%)

17.5

CPI (annual %)17.8

Exports of Goods and services (% of GDP)

21.3

Gross Official Reserves (in US$ bn)

2.9

Gross Official Reserves (in months of imports)

3.2

KES / 1 USD (Year End0

75.8

Nairobi

TANZANIA
Mombasa

Zanzibar

Source: AfDB, CBR

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

BB-

B+

Moody’s

Not rated

Not rated

S&P

B

B

Source: Bloomberg

Summary»» The Government securities yield curve extends to 20 years with six benchmark points developing along the curve.
»» Growing diversified investor base with increased presence of fund managers and foreign investors.
»» Strategic target of keeping Treasury bonds to 70% of domestic debt versus 30% for Treasury Bills.
»» Settlement cycle is T+1 for the primary market and T+3 for the secondary market.
»» Bloomberg and Reuters codes for market data:• KENGB Kenya Government bonds• KENTB Kenya Treasury bills• KE3MTB= Treasury bill yields• 0#KETSYSTR= Kenya Bond pricing• KES= KES1= Shilling spot rates• KESF= <0#KESF=> Shilling forward rates

INDIAN OCEAN

GDP per capita (Current US$)

72

Kenya

 Monetary Policy and Money Market
Monetary Policy
The Central Bank of Kenya (CBK) follows a monetary
aggregates targeting framework, namely reserve money
targeting. The instruments used to achieve periodic targets
are open market operations through vertical Repos/Reverse
Repos. The Central Bank Rate (CBR) was introduced tosignal the monetary policy stance. An East African regionalseminar held in Nairobi in March 2009 recommended
the introduction of a Modified Reserve Money Target
framework as a step towards inflation targeting, but noformal commitment has been annouced. The Monetary
Policy Committee reviews monetary policy decisions

bi-monthly, unless there is an extraordinary event that
requires earlier intervention.

Money Market
The most frequently used money market benchmark
is the 91-day (3-month) Treasury bill . The 44 member
interbank money market activity is concentrated at the
short end, mainly the overnight market, which sees anaverage volume of USD 185 million daily. There are 30
unit trusts operated by commercial banks, insurancecompanies, investment banks and Fund Managers offering Kenya Shilling Money Market Funds.

 Fixed Income Market
Government Securities

Non-Government Securities

Treasury bills are issued by the Central Bank of Kenya on
behalf of the Government with tenors of 91, 182 and 364
days. The 91-day and 182-day bills are issued weekly inalternate weeks, while the 364-day bills are issued twicea month. The auctions are Dutch multiple price auctions.

The commercial paper market has been dormant for thelast three years due to direct funding and syndication by
the commercial banks to prospective short-term corporate
issuers. The corporate bonds market is developing withnew issuers continuously coming to market. As at end
2009, the market had 17 issues by 11 issuers with a total
face value of KES 45 billion. The dominant issuing sector
is the banking sector with 6 issues, while the largest issue
is Kengen PIBO which has a face value of KES 25 billion.
Of the 17 issues, 9 were floating rate with a total facevalue of KES 6.6 billion, while 8 issues with a face valueof KES 38.3 billion were fixed rate. The pricing of thefloating issues is based on the 91-day or 182-day Treasury
bill, There is one issue by a parastatal (quasi Government
agency) valued at KES 25 billion. There are no municipal
bonds outstanding as of year end 2009.

Treasury bonds are issued in tenors of 1, 2, 5, 10, 15 and20 years. Multiple price auctions are held once a month
to roll over debt, and finance fiscal budget and infrastructure projects.
The graph below illustrates the Government securities
yield curve at specific dates.
Government securities yield curve as at 30 June
2007, 2008 and 2009
15%

Intermediaries

12%

9%

6%

91
day

182
day

364
day

June 30, 2009

2
3
5
10
12
15
20
years years years years years years years
June 30, 2008

Source: Central Bank of Kenya

June 30, 2007

Current rules require that all bonds are traded on the
Nairobi Stock Exchange. The market does not cater forover-the-counter trading and therefore brokers must be
engaged to finalize any transaction. So far, there are no
distinct market makers or primary dealers. However, plans
are underway to develop a model that includes market
makers. The Nairobi Stock Exchange has also approvedplans to introduce the Authorized Fixed Income Securities
Dealers. to trade fixed income instruments.

Investors
All 44 commercial banks and 2 mortgage companies
participate in both the Government and corporate debt
market. Locally-owned banks number 33, while 13 areforeign-owned.

Kenya73

As of 30 November 2009, banks held 53% of the KES
520.8 billion outstanding securities.
The Pension sector in Kenya has experienced significant
growth following the enactment of the Retirement Benefits Act establishing the Retirement Benefits Authority.
Pension funds have become more dominant as inflows
and asset sizes have grown. This KES 270 billion sector
held about 28% of outstanding Government securities as
at end June 2009.
Other investor categories are less dominant, with the 42
member Insurance sector holding 11.3% of all outstanding Government securities. Retail investors access themarkets, both Government and corporate, directly andthrough mutual funds. Minimum entry amounts allow
retail investors to easily participate. Direct retail investors
account for approximately 1.7% of outstanding Government securities. Foreign investor holdings are not easily
quantified since they invest indirectly through the banking
sector and fund managers.
Holdings by category of investor as at June 30,
2009 (in percent)Individuals, 1.63%

Anyother,
6.34%
Pension Funds,
27.35%

Commercial
Banks,
53.38%

Insurancecompanies,
11.29%

Thursday, with the result announced the same day. The
amount to be offered at the next auction is also announced
alongside the results as well as any upcoming redemption.
Minimum face value is KES 100,000 with any additionalamounts in multiples of KES 50,000. An Auction Management Committee (AMC) meets every Thursday at 16.00
hours to conduct the auction and determine successful
bidders. After considering all received bids, both competitive and non-competitive, the AMC arrives at a cut-off rate
based on amounts advertised. The successful weighted
average rate derived from competitive bids is applied to
all non-competitive bids and is published with the rest of
the results in daily newspapers and on the CBK website.

Secondary Market
Current trading rules require trading orders for listed
securities to be placed by stockbrokers duly licensed by
the Capital Markets Authority. The NSE has introduced
an ATS that is linked to the CSD at the Central Bank of
Kenya. All trades have to be transacted through the ATS.
Trading numbers and volumes increased tremendously
during 2009, with over 1900 trades worth KES 107 billion
transacted during the year. Trades have been done acrossthe whole Government securities yield curve.
Quoted spreads for the bills and bonds are typically 50
basis points. Pre-trade price discovery is through contacting counterparties in the market, while post-trade pricediscovery is from NSE reports. The day-count convention
for bonds is actual/364 and actual/365 for bills.
Trend in secondary market trading
120

Billions of KES

100
80

Source: Central Bank of Kenya

60

Primary Market

40

The primary market for Government securities is open to
all investors with accounts at the CBK Central Securities
Depository (CSD). Treasury bill auctions are held every

20
0

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: Nairobi Stock Exchange Foreign Exchange Market
The Kenyan Shilling (KES) is a free-floating currency thatis fully liberalized and convertible. There are no restrictions on transactions relating to the current and capital
accounts and no foreign exchange controls. Residents
and non-residents may hold foreign exchange accounts.

The daily average inflows and outflows in foreign exchangetransactions approximate USD 0.9 billion. However, on
average, the minimum transaction amount in the interbank
FX market is USD 0.25 million and the average transaction
size is USD 0.5 million.

74

Kenya

The graph below provides historical levels of the KES
against the USD.

KES per Unit of USD (Year End)
80

70

60

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg Derivatives Market
The market has had a limited number of interest rate
swaps, cross currency swaps and currency forwards.
Swaps on FX are often used in the interbank market forovernight borrowing for liquidity management. Interest
rates swaps are mainly among banks and are not very

regular; consequently there is limited data available. Tenors
have typically not exceeded 6 months for interest rate
swaps. Cross currency swaps can be structured for longer
period of up to 5 years.

 Regulation and Taxation
Regulation
The CBK, Capital Markets Authority, NSE and the Central
Depository and Settlement Corporation Acts play a rolein both the issuance and the regulatory framework for
Government securities.
The banks are regulated by the CBK, while the Retirement
Benefits Authority regulates the pension sector. The Insurance Regulatory Authority regulates the Insurance sector.

issued by the Government or parastatals. All conventional
Treasury bonds, Treasury bills and corporate bonds attract withholding tax at source (primary market), except
those investors who have tax-exempt certificates from the
Kenya Revenue Authority. However, bonds with maturities of 10 years and above attract 10% withholding tax
and those below attract 15% withholding tax. There is nodifference in tax treatment between resident and nonresident investors in Government and corporate bonds.

Taxation
Capital gains do not attract any taxation. Interest income
attracts tax on non-infrastructure/asset-backed securities Clearing and Settlement
The settlement cycle for the primary Government bondmarket is T+1, while for the secondary market the settlement cycle is up to T+3. Cash settlement of all trades
through the ATS takes place through the Kenya Electronic
Payment and Settlement System (KEPSS) also known
as Real Time Gross Settlement (RTGS), domiciled at theCentral Bank of Kenya. All securitized debt is dematerialized and DVP is fully automated. Securities are identified
with both ISIN Codes and CBK issue numbers.

As paperless securities with no physical certificates-investors receive statements showing their holdings asregistered on the Central Depository Securities (CDS)
Registry at the Monetary Operations & Debt Management
Department of the Central Bank. Physical CDS accountstatements are sent to investors on a quarterly basis andalso on request, provided the accounts show outstanding securities.

KenyaProspective investors who wish to trade in any Kenya
Government securities are required to open a CDS accountwith the Central Bank of Kenya. The CDS account acts
as the investor’s securities holding and trading account.
Investors may choose to open CDS accounts directly with
the Central Bank or open a client account through authorized agents that include commercial banks, investments
banks, stock brokers and investment advisors. No fee ischarged for opening and maintaining a CDS account thatis opened directly at the central bank.
CDS accounts may be opened in the names of individual
investors or corporate entities and individual investors
may open CDS accounts either singly or jointly. Corporate
CDS account holders include companies, co-operatives,

75

insurance companies, banks, non-bank financial institutions, NGOs and entities established by statute, which
are mainly State Corporations.
The CBK plays a custodial function for Government Securities. However, investments made through commercial
banks, investment banks, and unit trusts as nominees
do not have accounts/record with CBK. Corporate bonds
have different custodians, for example the KenGen bondhas the Central Depository and Settlement Corporation(CDSC) Limited as its custodian. Issuers may appoint
any independent custodian and registrar licensed by the
Capital Markets Authority.

 Recent Developments
Event

Date

Automation of trading and settlement of both Government and corporate bonds in the secondary market. All
GoK securities are traded at NSE, but settlement of cash and securities done at CBK on DvP basis

December
2009

Reporting of cut-off rate in auctions and reduced waiting time for trading newly issued securities from T+3 to
T+1,

October2009

Introduction of Horizontal Repos backed by GoK securities

September
2009

Introduction of 364-day Treasury bill and secondary trading of Treasury bills (364 days) on OTC

August2009

Split between 91 days and 182 days offer for auctions issuance frequency

July 2009

Change in withholding tax from 15% to 10% on bonds with maturities of more than 10 years

June 2009

Issuance of 15-20 year bonds to lengthen yield curve

June 2009

Reopening of benchmark bonds

April 2009

Infrastructure/Project-specific bonds issuance

February
2009

Reduction of minimum threshold to invest in Treasury bills from Ksh 1,000,000 to Ksh 100,000

January
2009

Introduction of standard market yield curve based on clean priceMarch 2008

 Regulatory Contacts
Capital Markets Authority

Central Bank of Kenya

Re-Insurance Plaza, 5th Floor, Taifa
Road, P.O. Box 74800-00200, City Square, Nairobi, Kenya
Tel: +254-20-226225/221910, Fax: +254-20-228254
E-mail: corporate@cma.or.ke
Website: www.cma.or.ke

Haile Selassie Avenue, P.O. Box
60000-0200, Nairobi, Kenya
Tel: +254-20-2861000/2860000
Fax: +254-20-340192
E-mail: info@centralbank.go.ke
Website: www.centralbank.go.ke

76

Kenya

Nairobi Stock Exchange

Fund Managers Association (FMA)

1st Floor, Nation Centre Kimathi Street, P.O. Box 4363300100, Nairobi, Kenya Tel: +254-20-230692
Fax: +254-20-224200
E-mail: cmwebesa@nse.co.ke
Website: www.nse.co.ke

P.O. Box 46143 00100 Nairobi,
ICEA Building, Kenyatta Avenue, Nairobi

Kenya Association of Stockbrokers andInvestment Bankers (KASIB)

Retirement Benefits Authority (RBA)
Retirement Benefit Authority,
Rahimtullah Tower, Upper Hill, 13th Floor, P O Box 57733– 00200 Nairobi

P.O. BOX 43593-00100 Nairobi, Kenya

Insurance Regulatory Authority (IRA)

Central Depository for Settlement
Corporation (CDSC)

Insurance Regulatory Authority,
Zep Re Place, off Mara road, Upper Hill, P O Box 43505 –00100 Nairobi

National Center, 10th Floor, Kimathi Street
P.O.BOX 3464-00100 GPO Nairobi
TEL: +254 (20) 2229406 – 08, 2229421/26

Lesotho2009 at a glance
Population (mn)

2.1

Population growth (annual %)0.9

Official language

Butha Buthe

SOUTH
AFRICA

English/Sesotho

Currency

Loti (LSL)

GDP (Current US$ bn)

1.4

GDP growth (annual %)1.1

GDP per capita (Current US$)

659.9

Total Debt (US$ bn)

0.6

Total Debt/GDP (%)

47.1

CPI (annual %)6.1

Mokhotlong
MaseruThaba Tseka

LESOTHO
Mafeteng

Mohale’s Hoek

Quthing

Exports of Goods and services (% of GDP)

59.7

Gross Official Reserves (in US$ bn)

N/A

Gross Official Reserves (in months of imports)

N/A

LSL / 1 USD (Year end)

7.3980

Qacha’s Nek

SOUTH
AFRICA

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

BB

BB-

Moody’s

Not rated

Not rated

S&P

Not rated

Not rated

Summary»» Lesotho is a member of the Common Monetary Area (CMA) that comprises South Africa, Namibia and Swaziland.

Accordingly, its financial system is strongly integrated with the South African financial markets.
»» The fixed income market is composed solely of Government securities.
»» The investor base is composed almost exclusively of commercial banks.
»» There is no benchmark yield curve.
»» The Bank of Lesotho has implemented a number of measures aimed at improving the money market in 2008.
»» Reuters codes for market data: LSTB01 and LSTB02.

78 Monetary Policy and Money Market
The Central Bank of Lesotho has the authority to definemonetary policy. Nonetheless, in line with the existing
fixed currency peg, the Treasury bill rates are closely alligned with South African rates.
Lesotho uses the Lombard facility (the policy rate) which
is a punitive overnight facility (the Treasury bill rate plus
a margin) at the Central Bank to meet commercial banks’short-term liquidity needs. The Lombard rate is linked to

the Treasury bill rate (the 91-day TB discount rate plus
400 basis points).
Until recently, the Bank of Lesotho had two Treasury billsof 91 and 182 days. In 2008, two longer-dated bills wereintroduced, with 273 and 364 days maturities.

 Fixed Income Market
Government Securities

Investors

The Lesotho fixed income market is currently comprisedof Government Treasury bills with a maturity period notexceeding one year. These include 91-, 182-, 273 and364-day Treasury bills and are currently issued purely
for monetary policy purposes.

Commercial banks are the main buyers of Government
bills in the competitive market.1 There are four major
players in the commercial banking arena: Standard Lesotho Bank Limited, Ned Bank Limited and First National
Bank, which are all South African owned. There is alsoa state-owned Lesotho Post Bank. Non-competitive bids
are aimed primarily at individual investors.

The sale of the Treasury bills is done via competitive
and non-competitive bids of LSL 250,000 and LSL 5,000
respectively. The Central Bank of Lesotho employs the
Dutch auction system for the sale of bills, which takes
place on a fortnightly basis.
The Government has issued 5 and 10-year bonds in thepast, with the last issue dating back to 1999. The 5-yearbonds redeemed in 2004, while the 10-year instrument
matured in 2009. These bonds were primarily issued tofacilitate the liquidation of state-owned banks in Lesotho.

Holdings by category of investor as at June 30,
2009 (in percent)
Other
8%

Insurancecompanies
10%

Commercial Banks
82%

Arrangements are currently underway to establish a bondmarket and a stock exchange.
Maturity profile of Government of Lesotho
securities as at June 30, 2009 (in Loti)
1,0

Source: Central Bank of Lesotho

Millions

0,8
0,6
0,4
0,2
0,0
0 to 1 year

1 to 3 years

Source: Central Bank of Lesotho

3 to 5 years

5 to 10 years
Maturity

1 Central Bank of Lesotho Implements Strategies Aimed atStrengthening Money Market in Lesotho: Implications for Economic
Growth, August 2008

79

 Foreign Exchange Market
The Central Bank is responsible for executing the foreignexchange policy in line with the CMA’s foreign exchange
policy. Under the CMA agreement, Lesotho enjoys freeaccess to the South African foreign exchange market.
All CMA member countries apply the same exchange
control regulations: non-resident capital flows are generally unrestricted; capital, profits and dividends can berepatriated; and exchange control limitations apply toresident capital flows.

LSL per Unit of USD (Year End)
10

8

6

4

The opposite graph provides historical levels of the LSL
against the USD.

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg Regulation and Taxation
Regulation
The Central Bank of Lesotho regulates all financial institutions with the goal of preserving the financial strengthand stability of the national banking system. It conducts
onsite examinations and offsite surveillance to ensure
adherence to prudential requirements and the proper
functioning of the banking system.

rent developments in the financial sector, as well as bestinternationally practice and standards.

Taxation
Tax is withheld at source at a rate of 10% on interest paidin excess of the exempt amounts. Withholding tax rates
applicable to residents and non-residents are 10% and15%, respectively.

The Central Bank undertook a review of the Financial
Institutions Act in 2008 to align the Act with the cur- Clearing and Settlement
The settlement of securities is processed through the RealTime Gross Settlement System (RTGS). This procedure isdone on a same-day basis.

 Regulatory Contacts
Central Bank of Lesotho
P.O. Box 1184,
MASERU 100, Kingdom of Lesotho Corner Airport andMoshoeshoe Roads, Maseru Central, Lesotho
Tel: +266)-22314281/22324281
Fax: +266-22310051/22310679
E-mail: cbl@centralbank.org.ls
Website: www.centralbank.org.ls

In an RTGS system, transactions are settled across accounts held at the Central Bank on a continuous grossbasis. Settlement is immediate, final and irrevocablesignificantly reducing credit risk accross the market.

Liberia
2009 at a glance
Population (mn)

3.9

Population growth (annual %)4.2

Official language

EnglishCurrency

GUINEA

Voinjama

SIERRA
LEONE

Liberian Dollar (LRD)

IVORY COAST
Sanniquellie

GDP (Current US$ bn)

1.3

GDP growth (annual %)4.2

GDP per capita (Current US$)

318.1

Total Debt (US$ bn)

2.5

Total Debt/GDP (%)

200.1

CPI (annual %)7.1

Exports of Goods and services (% of GDP)

35.7

Gross Official Reserves (in US$ bn)

0.2

Gross Official Reserves (in months of imports)

1.0

LRD / 1 USD (Year End)

69.50

Gbarnga
Yamoussoukro
Monrovia
ZwedruBuchanan

LIBERIA
HarperATLANTIC OCEAN

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P

Summary»» Following years of civil conflict, Liberia’s economy and financial sector have been developing gradually.
»» Liberia has not begun issuing Government securities, but is in the process of setting up a short-term Treasury bills market.

82

Liberia Monetary Policy and Money Market
The Central Bank of Liberia regulates the financial market.
The banking sector has excess liquidity and the goal ofmonetary policy is to maintain relative price stability by

influencing the money supply and ensuring exchange ratestability. The operating instrument for monetary policy isthe exchange rate the purchase and sale of USD.

 Fixed Income Market
Government Securities

Banking System

There is no Treasury-bill market at present or any issuanceof Government bonds. The Government is developing theinfrastructure for Treasury bills.

The banking sector is comprised of eight banks. The absence of Government securities has created a shortage ofinvestible assets and has resulted in high liquidity levelsin the banking system.

 Foreign Exchange Market
The Liberian dollar (LRD) is a free-floating currency.
However, the US dollar is also legal tender in Liberia andis used alongside the LRD. The Liberian dollar is held forsmall purchases, especially in the rural areas, and is usedby the Government for payment of civil servants’ salaries,
the US dollar is the medium of exchange in trade andfinancial transactions.

The graph below provides historical levels of the LRD
against the USD.
LRD per Unit of USD (Year End)
Source: Bloomberg
80

70

The current and capital accounts are fully liberalized andthere are no restrictions on investment returns repatriation. Any investment proceeds are freely convertible andtransferable in and out of the country.
The Central Bank of Liberia intervenes in the foreignexchange market from time to time as this is the mostdominant monetary policy tool.

60

50

40

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009 Regulation and Taxation
The Central Bank of Liberia is the regulator of the banking
sector as well as the capital markets. The national pen-sion scheme is regulated by the Ministry of Labor andthe insurance industry by the Ministry of Transportation.

Liberia Regulatory Contacts
Central Bank of Liberia
P. O. Box 2048
Corner of Warren and Carey Street
Tel: + (231) 226-991/ 225-685/ 229-728
Fax: + (231) 226-114
Website: www.cbl.org.lr

83

Libya2009 at a glance

TUNISIA

Population growth (annual %)1.9
ArabicCurrency

Libyan Dinar (LYD)

Al-Bayd-az
Bangh-az-i

Tripoli

Tubruq

Surt

LIBYA
EGYPT

6.4

ALGERIA

Population (mn)Official language

MEDITERRANEAN SEA

Gabès

Marz-uq

GDP (Current US$ bn)

66.2

GDP growth (annual %)1.6

Al-Jawf

GDP per capita (Current US$)

10,311.5

Total Debt (US$ bn)

5.6

Total Debt/GDP (%)

8.4

CPI (annual %)5.3

Exports of Goods and services (% of GDP)

56.1

Gross Official Reserves (in US$ bn)

92.1

Gross Official Reserves (in months of imports)

41.0

LYD / 1 USD (Year End)1.2313

NIGER

SUDAN
CHAD

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

BBB+

BBB+

Moody’s

Not rated

Not rated

S&P

A-

A-

Source: Fitch, S&P

Summary»» There is no fixed income securities market in Libya.
»» Structural reforms in the banking sector are underway, including privatization of several local banks. Banks holdsignificant excess liquidity.
»» Strengthening of the private sector and diversification of the economy.

86

Libya

 Monetary Policy and Money Market
The banking system in Libya is characterized by excess
liquidity that has its roots in the fiscal surplus that Libya
has enjoyed over the years. Deposits in banks that arepart of state budget allocations and intended for public
entities are kept in banks, earning no interest as they
await public entity drawdowns. These funds are invested
by commercial banks in certificates of deposit issued by
the Central Bank of Libya (CBL).
The CBL introduced certificates of deposit (CD) in May
2008 to control the amount of liquidity in the banking
system. These CDs are of a single maturity of 91 days andare offered at a predetermined fixed rate. The CBL is toextend the range of the maturities of certificates of deposit
beyond 91 days and to develop an auction mechanism.

The CBL determines the interest rate applicable to these
deposits and also determines the uniform interest rate cap
at which the commercial banks on-lend to their clients.
However, the CBL does not determine the deposit rateapplied by commercial banks to their clients’ deposits.
In May 2008, the CBL established the Repurchase Agreement market, which was a step towards indirect monetary
policy instruments. An electronic auction trading system
on 91-day CBL certificates of deposit was also launchedand several changes in implementation of monetary policy
are underway.

 Overview of Financial Sector
The banking sector is comprised of the Libyan Development Bank, a micro-credit and economic developmentbank, a savings and real estate development bank (commonly referred to as Specialized Credit Institutions SCI)
and over 45 small regional banks, most of which havebeen merged under the National Banking Corporation.
This corporation provides banks with services such as accounting and training.1 The SCI provide subsidized credit
to residential real estate, agriculture, and small enterprises
in competition with commercial banks.

1

Oxford Business Group Report, Libya 2008

Libya is reforming its state-dominated banking sector thatwas built to support Government development priorities.
Following the recent initiatives to privatize several banks,
more credit is flowing into the private sector and SMEs.
Commercial banks still have high liquidity that is slowly
but gradually filtering into loans to the private sector.
However, the main assets on the commercial banks books
are cash and short-term deposits held at the Central Bankof Libya.
The privatization process has seen international banks
like BNP Paribas acquire a stake in local banks. This will
be vital in transferring technology and skills into the
Libyan banking environment.

Foreign Exchange Market
The Libyan dinar (LYD) underwent two major devaluations: 51% in January 2002 and 15% in June 2003. Since
2003, the LYD has been pegged to the IMF’s Special
Drawing Rights (SDR), a basket of currencies consistingof USD, EUR, JPY and GBP. The peg is LYD 2.80/1 SDR,
allowing maximum margins of +/7.5% around the peg rate.
The LYD has been generally stable within a range of LYD
1.22–1.42/1 SDR. The CBL uses its considerable foreignexchange reserves to ensure exchange rate stability versus

the US dollar. Commercial banks are allowed to sell foreign
currencies at the official rate for transactions related toimports of essential goods or medical treatment abroad,but fees are levied on outward foreign exchange transfers.
The LYD is extremely illiquid. In order to conduct FXtransactions, presentation of commercial papers and/or
the purpose or the source of funds has to be provided.
Residents and non-residents may hold foreign currency
accounts with prior approval. Similar approvals are also required for direct investment and other capital transactions.

LibyaThe LDY’s peg to the Special Drawing Right (SDR) continues to serve Libya well. While the LYD appears to bemoderately overvalued, this is likely to be partly transitory
in view of the projected decline in the external current
account surplus.2
The opposite graph provides historical levels of the LYD
against the USD.

87

LYD per Unit of USD (Year End)
1.5

1.4

1.3

1.2

2

http://www.imf.org/external/pubs/cat/longres.cfm?sk=23299

Derivatives Market
There is no derivatives market in Libya.

Regulation
The Central Bank of Libya regulates the banking and thenonbank sectors of the economy.

Clearing and Settlement
The Central Bank manages the clearing and settlement
system. The required infrastructure for electronic clearance and settlement is not well developed.

Regulatory Contacts
Central Bank of Libya
P.O. Box 1103, Tripoli, Libya Tel: +218-21-3333591-99
Fax: +218-21-4441488
E-mail: info@cbl.gov.ly
Website: www.cbl.gov.ly

Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Madagascar
COMOROS2009 at a glance

MoroniPopulation (mn)

19.6

Population growth (annual %)2.7

Official language

Antsiranana

MAYOTTEFranceMalagasy

Currency

Mahajanga

Malagasy Ariary(MGA)

GDP (Current US$ bn)

8.7

GDP growth (annual %)1.7

GDP per capita (Current US$)

443.5

Total Debt (US$ bn)

2.5

Total Debt/GDP (%)

28.8

CPI (annual %)10.3

Exports of Goods and services (% of GDP)

20.9

Gross Official Reserves (in US$ bn)

0.9

Gross Official Reserves (in months of imports)

2.6

MADAGASCAR
Toamasina
Antananarivo

Fianarantsoa

MGA / 1 USD (Year end)

INDIAN OCEAN

Toliara1,970.00

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P

Summary»» Government securities yield curve has longest tenor of 52 weeks.
»» Commercial banks are the main investors.
»» Weekly auctions of Treasury bills.
»» No active secondary market. Tradable debt securities were launched in the second quarter of 2007.
»» Reuters codes for market data:• BCMT (for FX and Foreign Money Trades Only), Page: BC-MMG

MAURICEPort LouisREUNION
France90

Madagascar Monetary Policy and Money Market
Monetary Policy

Money Market

The main objective of the Central Bank of Madagascar(BCM) is to maintain the internal and external stabilityof the currency by targeting the stability of both domestic
prices and real effective exchange rates. The management
framework of the monetary policy is based on the strict
monitoring of monetary aggregates through open market
and Repo operations and on the use of prime rate.

The benchmark is the Central Bank’s prime rate. Theinterbank money market is comprised of Repos andTreasury bills.

 Fixed Income Market
Government Securities
Treasury bills are the main Government debt instrument.
They are issued with maturities ranging from 4 weeks to
52 weeks. Historically, the Treasury issued Government
bonds, however as of June 2009, there was no outstanding Treasury bond.

Government securities yield curve as at
31-December 2007, 2008 and 2009
12%

10%

The table below provides details of Treasury bill issuance.

8%

Auction details

6%

Auction frequency

Every 2 Weeks:• Wednesday for competitive bids
• Tuesday for non-competitive bids

Auction method• For competitive bids : Dutch• For non-competitive bids: issued atweighted average rate of competitive
bids

Settlement cycle
AccessMinimum bid
amountForeign investors

Auction day +2 days
Via banks and financial institutions
20 million Ariary
Not eligible to invest in T-bills, unlessthey are resident and have a local currency bank accountSource: BCM

As of 31 December 2009, the outstanding T-bills amountwas MGA 743 billion, with more than 82% maturing
within 24 weeks.
The opposite graph illustrates the changes in Madagascar’s
Government yields curves for the last three years.

4%4-weeks

12-weeks

30-Jun-09

24-weeks

30-Jun-08

52-weeks

30-Jun-07

Source: Central Bank of Madagascar (BCM)

Non-Government Securities
There is no corporate and municipal debt market in
Madagascar.

Intermediaries
There are no primary dealers in Madagascar. However,subject to a good credit standing and a local currency account, any investor excluding foreign entities can haveaccess to both the primary and the secondary market.

Investors
Commercial banks are the most active investors in Madagascar’s debt market. As of 31 December 2009, their
total holdings were approximately 68% of outstanding
Government debt.
The following chart provides holdings by investor type
as of December 2009.

Madagascar

91

Holdings by category of investor as at June 30,
2009 (in percent)Individuals, 3%
Corporate, 1%

Others, 3%

No Banking
Financial
Institutions,25%

Primary Market
The National Treasury regularly issues short-term debt
instruments in the local capital market to fulfil financing
needs at competitive prices. The BCM does not buy T-bills,
but accepts them as collateral for Repos and loans to banks.

Secondary Market
Commercial Banks,
68%

The secondary market is not very liquid. The number oftransactions has dramatically decreased by more than 45%
over the last six years. Similarly, the volume of transactions declined from approximately MGA 1,296 billion
in 2004 to approximately MGA 194 billion in 2008. Asof December 2009, the volume of transactions was approximately 60 billion.

Source: Central Bank of Madagascar Foreign Exchange Market
The official currency of Madagascar is the Malagasy Ariary(MGA). The exchange rate is freely determined by theinterbank currency market through supply and demand.
The Central Bank of Madagascar (BCM) limits short-term
excessive fluctuations through direct interventions.
In 1996, the Government lifted all restrictions on current
account-related payments, while capital transactions require prior authorization by the Ministry of Finance andBudget. Between 2006 and 2008, a current account deficit
was recorded. There was a surplus to the capital accountfollowing a huge inflow of foreign direct investments. In
total, the balance of payments was in surplus over thethree years prior to 2009, after which the trend reversed.
Capital inflows, transfers of dividends and earnings arefree of restrictions, however, the repatriation of capitalis subject to authorization.

 Derivatives Market
There is no derivatives market in Madagascar.

The following graph provides historical levels of the MGA
against the USD.
MGA per Unit of $US (Year End)
2500

2000

1500

Dec 2004

Dec 2005

Dec 2006

Source: Central Bank of Madagascar

Dec 2007

Dec 2008

Dec 2009

92

Madagascar Regulation and Taxation
Regulation

Taxation

The Ministry of Finance supervises the financial sector.

Interest income is taxable at 23% and collected at source.

 Clearing and Settlement
The BCM is the clearing and settlement house and thecentral depository for debt instruments. All securities
are dematerialized, identified with national identification Regulatory Contacts
Banque Centrale de Madagascar
B.P 550, Madagascar, Antananarivo (101),
Madagascar
Tél: +261 20 22 217 51
Fax : +261 20 22 345 32
E-mail: sbu@bfm.mg mailto:gv.cab@bfm.mg
Website: http://www.banque-centrale.mg

codes and settled automatically through a delivery against
payment system.

Malawi2009 at a glance
Population (mn)

15.3

Population growth (annual %)2.8

Official language

English/Chichewa

Currency

Malawian Kwacha(MWK)

TANZANIA

Mzuzu
ZAMBIA
Lake Nyasa

GDP (Current US$ bn)

3.9

GDP growth (annual %)5.7

GDP per capita (Current US$)

214.7

Total Debt (US$ bn)

0.9

Total Debt/GDP (%)

26.5

CPI (annual %)5.4

Exports of Goods and services (% of GDP)

24.9

Gross Official Reserves (in US$ bn)

0.15

Gross Official Reserves (in months of imports)

2.2

mwk / 1USD (Year End)

MALAWIMOZAMBIQUE
Lilongwe

Zomba
Blantyre

145.9973

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P

Summary»» Government securities yield curve has tenors up to 273 days.
»» The banking industry is dominated by three large institutions that own approximately 70% of total assets anddeposits.
»» The fixed income market consists almost exclusively of Government and Central Bank short-term bills.
»» The National Bank of Malawi, one of the leading commercial banks, has recently introduced a bond.
»» Most of these instruments are purchased by commercial banks and discount houses.

94

Malawi Monetary Policy and Money Market
The Reserve Bank of Malawi (RBM) focuses monetary
policy efforts on keeping inflation under control. The
RBM is also mandated, under the Reserve Bank of Malawi
Act, to manage the country’s foreign exchange reserves.

In 2008, confronted with scarce foreign currency reserves,
the Government requested the IMF’s assistance via an
exogenous shock facility.

During 2007 and 2008, the central bank pursued an expansionary monetary policy to promote economic growthand private sector development.

Fixed Income Market
Government Securities

Investors

There is a limited supply of fixed income securities inMalawi. The offering is composed exclusively of shortterm Government bills. The Government issues Treasury
bills with maturities of 91, 182 and 273 days.

The Investor base is composed primarily of commercial
banks. There are 11 commercial banks operating in the
country and three of these control over two-thirds of themarket. Insurance companies are also buyers of Treasury bills. There are 13 insurance companies: 8 non-life
insurance companies, 4 life insurance companies and 1
reinsurance company.

Intermediaries
The Reserve Bank of Malawi acts as an agent of the Malawi
Government in the issuance of Treasury bills.
Two discount houses are the main participants in thebuying and selling of Treasury securities in the secondary market.

Foreign Exchange Market
The Malawian Kwacha (MWK) was floated on 7 February
1994. The official exchange rate is based on the mid rateof the average buying and selling rates as reported bycommercial banks.
The currency is convertible with respect to current account transactions. Nonetheless, given that capital accountcontrols still exist, the currency is not freely convertible
internationally. Both inward and outward direct andportfolio investments require prior approval.

MWK per Unit of USD (Year End)
150

120

90

The opposite graph provides historical levels of the MWK
against the USD.

Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Malawi95

Derivatives Market
There is no derivatives market. The securities law is being
reviewed to consider derivatives trading.

Regulation and Taxation
Regulation

Taxation

All banks and insurance companies, as well as the Malawi
Stock Exchange and the securities market are regulated
and supervised by the Reserve Bank of Malawi.

A withholding tax of 15% is levied on interest income.

The Malawi Stock Exchange operates under the CapitalMarket Development Act of 1990 and the Companies
Act of 1984.

Regulatory Contacts
Malawi Stock Exchange

Reserve Bank of Malawi

Old Reserve Bank Building, Private
Bag 270, Blantyre, Malawi
Tel: +265-1-624233
Fax: +265-1-623636
E-mail: mse@mse-mw.com
Website: www.mse.co.mw

Box 30063,
Capital City, Lilongwe 3, Malawi
Convention Drive
City Centre, Lilongwe, Malawi
Tel: +265-1-770.600
Fax: +265-1-772752/265, 774289
E-mail: webmaster@rbm.mw
Website: www.rbm.mw

Mauritania
2009 at a glance

MOROCCO

Population (mn)

El Aaiún

3.3

ALGERIAATLANTIC OCEAN

Population growth (annual %)2.3

Official language

ArabicCurrency

WESTERN
SAHARA

Mauritanian Ouguiya(MRO)

GDP (Current US$ bn)

3.1

GDP growth (annual %)1.8

GDP per capita (Current US$)

952.2

Total Debt (US$ bn)

1.9

Total Debt/GDP (%)

61.7

CPI (annual %)4.2

Exports of Goods and services (% of GDP)

44.9

Gross Official Reserves (in US$ bn)

N/A

Gross Official Reserves (in months of imports)

N/A

MRO / 1USD (Year end)

263.00Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» Government securities yield curve has longest tenor of 50 weeks.
»» Financial market is dominated by commercial banks.
»» Treasury bill auctions are held every week»» No secondary market trading activity

FdérikNouâdhibou
Atâr
MALI

MAURITANIA

Nouakchott

Aleg

Rosso

Kaédi

Dakar

SENEGAL

Sélibaby
Mopti

98

Mauritania Monetary Policy and Money Market
Established in 1973, the Banque Centrale de Mauritanie(BCM) is in charge of the monetary policy of the Islamic
Republic of Mauritania with the main objective of pricestability. The BCM ensures the stability of the Mauritanianfinancial system and supports the implementation of theeconomic policy defined by the Government.
In January 2007, the BCM went through an importantreform aimed at strengthening its independence, withgreater autonomy in the formulation and implementation of the monetary policy through the creation of theMonetary Policy Committee (MPC). The MPC meets once amonth to examine monetary and economic developments
and takes necessary actions which are compiled andpublished in a periodic newsletter. The main instruments
are open market and Repo transactions, and minimum
reserve requirements for banks.

In 2008, the BCM categorized inflation as an operational
strategic target and set up a strategic plan that aims to
upgrade its information infrastructure and enhance theinstitution’s analytical capabilities, in order to better define
inflation target and monitor price levels.
The main instruments in the Mauritanian money market
are Treasury bills “bons de trésor à court terme” (BTC),
certificate of deposit (CDs), commercial papers (CPs), Central Bank bills (CBBs) and Repos. The interbank market
benchmark rates are the Central Bank prime rate and theweighted average treasury bills rate (WATBR). In 20091,
the WATBR fluctuated between 8% and 12%, with the
majority of the decline occurring during the second halfof the year.

1

Source : BCM website Fixed Income Market
Government Securities
BTCs are issued through a weekly auction by the national
Treasury in coordination with the BCM to help regulatemoney supply in the interbank market and to meet theGovernment’s short-term liquidity needs. The Treasury
can also issue Treasury bonds, known as “bons du trésor
annual” (BTA), and “Titres de Créances Négociables” (TCN)
to fulfil the funding needs of the Government, as well as
for debt management purposes.
The Government of Mauritania issues Treasury bills
through a weekly auction on Mondays, for 4-, 13-, 26and
50-week tenors. BTC are issued at a discount for a multipleof 1 million MRO. In 2009, the amount of BTC issued
per auction was between MRO 5 and 10 billion, with aslight increase in the fourth quarter of the year. As theissuing agent of the Government, the national Treasury
can also issue Treasury bonds (BTA) for a maturity ofmore than 1 year.
The opposite graph shows the fluctuation of the WATBR in
2009.
The Central Bank of Mauritania issues bills with tenor ofless than one year to regulate the interbank money supply.

Evolution of the weighted average treasury bills
rates in 2009
12%

10%

8%

Jan 09Mar 09 May 09

Jul 09

Sep 09

Nov 09Jan 10Mar 10Source : BCM

Non-Government Securities
There have been no corporate issuances in the Mauritanian debt market.

Intermediaries
Commercial banks are the main intermediaries of theMauritanian debt market. They have access mainly tothe primary market for their own book or for those of
their clients.

Mauritania

99

Investors

Primary Market

The banking sector is the major investor in Mauritania,
accounting for the majority of BTC’s holdings in 2009.
Foreign investors have access to the primary market;
however, their participation is currently very marginal.

Commercial banks are the main players of the primarymarket.

Secondary Market
Established in 2007, the secondary market is not yet active.

 Foreign Exchange Market
The Mauritanian Ouguiya (MRO) is a managed floating
currency. Since May 2004, the MRO fluctuated between
MRO 268.6 and MRO 250.6 per 1 USD.

MRO per Unit of USD (Year End)
275
270

Mauritania has a free exchange regime. In practice, thetransfer of capital is handled by banks. Since the sector
is liberalized, banks do not need authorization from theBCM to transfer funds offshore.

265
260
255

The opposite graph provides historical levels of the MRO
against the USD.

250

Dec 2004

Dec 2005 Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: BCM and Bloomberg Derivatives Market
There is no derivatives market in Mauritania.

Regulation and Taxation
Regulation

Taxation

The BCM is the main regulatory body of the financial
market. It supervises the banking sector, which comprises 12 commercial banks, 8 insurance companies and
80 microfinance institutions, including 51 credit unions“Caisses Populaires locales d’Epargne et de Crédit” (CAPEC).

Both foreign and local investors are treated equally in accordance with the tax laws currently in effect. Interest on
Treasury bills is subject to personal and corporate taxes.

100

Mauritania Clearing and Settlement
The BCM is the clearing and settlement house, as well as
the central depository for securities.

 Regulatory Contacts
Banque Centrale de Mauritanie
B.P. 623 Nouakchott, Mauritanie
Tel: +222-252206, 252888
Fax: +222-252759
E-mail: info@bcm.mr
Website: www.bcm.mr

Mauritius
2009 at a glance
Population (mn)

1.3

Population growth (annual %)0.7

Official language

INDIAN
OCEAN

English/French

Currency

Mauritius Rupee(MUR)

GDP (Current US$ bn)

Triolet

MAURITIUS

PAMPLEMOUSSES

l’Aventure

Port Louis

9.5

Beau Bassin

Rivièredu Rempart

Moka
Rose Hill

GDP growth (annual %)2.0

Quatre Bornes
VacoasGDP per capita (Current US$)7,351.3

Total Debt (US$ bn)

0.9

Total Debt/GDP (%)

9.8

CPI (annual %)7.3

Exports of Goods and services (% of GDP)

52.5

Gross Official Reserves (in US$ bn)

1.8

Gross Official Reserves (in months of imports)

3.8

MUR / 1USD (Year end)

TamarinPhœnixCurepipe

Rose Belle

Mahébourg

Savannah30.3500

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

Not rated

Not rated

Moody’s

Baa2

Baa2

S&P

Not rated

Not rated

Source: Bloomberg

Summary»» Government securities yield curve has longest tenor of 20 years.
»» Securities are issued to finance Government expenditure. The Bank of Mauritius issues bills for money market

liquidity management.
»» Treasury bills auctions are announced two days before issuance; the issuance calendar for Government bonds

is available on the websites of the Bank of Mauritius and the Ministry of Finance, and is also published in thelocal press.
»» Challenges facing the market include development of benchmark securities, issuing single maturity securities,
developing an active secondary market and online auctioning of Government Securities.
»» Reuters codes for market data:• BOMA, BOMP, BOMTBA, BOMTBC, BOMTBD, BOMTBE102

Mauritius Monetary Policy and Money Market
The primary objective of the Bank of Mauritius (BOM)
is to maintain price stability and to promote orderly andbalanced economic development. The Monetary Policy
Committee (MPC) of the Bank of Mauritius formulates anddetermines the monetary policy to be conducted by theCentral Bank. In the current monetary policy framework,
introduced in December 2006, the key Repo rate is thepolicy instrument used to signal changes in the monetary
policy stance. The MPC convenes on a quarterly basis,
and also as and when required outside regular meetings,
to decide on the level of the key Repo rate. To sensitize
economic agents and explain monetary policy decisions,a transparent communication strategy is in place.
An interest rate corridor has been set at +/125 basis points
around the key Repo rate to ensure coherent movement ofinterbank interest rates with the policy interest rate. To
influence money market liquidity, the Bank regulates the
supply of reserve money. In addition to reverse repurchaseand repurchase transactions conducted at 125 basis points
below and above the key Repo rate respectively, Bank of
Mauritius bills of 28 and 56-day maturities are also issued
to manage money market liquidity. With the shorter endof the yield curve anchored, the overall yield curve will be
prone to adjust to any changes in the policy interest rate.

The Bank provides a Special Deposits Facility to banks at
its discretion, at 100 basis points below the key Repo rate
for a maximum period of 21 days. An Overnight Facility
against collateral at 150 basis points above the key Repo
rate is also provided subject to a borrowing quota. As
lender of last resort, the Bank maintains a collateralizedStanding Facility to banks without any borrowing quota
at 400 basis points above the key Repo rate.
The price stability objective is clarified under the Act which
provides for the Bank to determine, with the concurrenceof the Minister of Finance and Economic Empowerment,“… the accepted range of the rate of inflation during agiven period consistent with the pursuit of the pricestability objective”. The legal requirement is presently
under consideration for implementation. The fulfillmentof this requirement will foster the anchoring of inflation
expectations which will generate wide-ranging benefits
for the economy.
Details of interbank and Repo transactions are posted
on Reuters and published in the monthly bulletin of the
Bank of Mauritius.

 Fixed Income Market
Government Securities
Treasury bills are issued with tenors of 91, 182 and 364
days. Auctions are held weekly and the day-count convention is actual/365.
Treasury note auctions are held monthly with tenors for
2, 3 and 4 years. Government bond tenor is 5 years andlong-term bond tenors are 7, 13 and 20 years. Auction
frequency is every 2 months for 5-year bonds and 2 or 3
times a year for long-term bonds.
Government securities are issued by the Bank of Mauritius
on behalf of the Government of Mauritius solely for
financing Government expenditure. The market offers
fixed-rate bonds, inflation linked bonds and zero coupon
bonds. The dominant principal payment mode is bullet
redemption.
The Bank of Mauritius issues 28-day and 56-day bills tomanage money market liquidity.

Government securities yield curve as at 30 June
2007, 2008 and 2009
15%

Yield

12%

9%

6%

3%

91 day182 day

1 year30-Jun-09

Source: Bank of Mauritius

2 years

30-Jun-08

3 years

5 years

30-Jun-07

20 years
Tenor

Mauritius

103

Non-Government Securities
Corporate bonds are listed on the Mauritius Stock Exchange (SEM) and are traded on both the SEM and the
OTC board in Mauritius. However, new issuances havebeen limited recently. This is partly due to the Government
reversing its favourable tax policy on interest paymentsof corporate bonds. Consequently, as of December 2009,
there was no outstanding corporate bond in the market.

Intermediaries
Eleven investment dealers trade Government of Mauritius
Securities/Bank of Mauritius Bills on the Stock Exchangeof Mauritius. A Primary Dealer System was established in
March 2002 and currently there are twelve primary dealer
banks. Primary dealers and other financial institutions participate at the primary auction of Government Securities.
Non-residents can participate in the market through approved primary dealers or investment dealers.

Investors
Proportions of holders by investor category are as follows:
Holdings by category of investor as at June 30,
2009 (in percent and million rupees)
Other 3%Central Bank 0%

Foreign Investors 0%

Pension funds,
32%
Commercial Banks,
51%
Insurancecompanies,
14%

Source: Data from Bank of Mauritius

There are currently 18 registered deposit-taking banks and
13 registered non-bank institutions operating in Mauritius,
The banking industry is very developed and efficient, butthere is a considerable degree of concentration of owner-

ship. The two largest banks in Mauritius, the Mauritius
Commercial Bank and the State Bank of Mauritius, control
approximately 70% of all banking assets. Total assets ofcommercial banks as of 30 June 2009 amounted to MUR
743 billion, which represents an increase of 1.9% over theprevious year. Total deposits stood at MUR 547 billion,
including MUR 351 billion held in foreign currencies.
Mauritius has a balanced and well-managed multi-pillar
pension system. In addition to several public components,
such as the Basic Retirement Pension, the National Pensions Fund, the National Savings Fund, and the Civil
Service Pension Scheme, there are over 1,000 funded
occupational pension schemes that play an increasingly
important part in the fixed income market.
The insurance sector is highly concentrated: the three largest groups, SICOM (State Insurance Company of Mauritius,a state-owned company), Swan/Anglo-Mauritius and BAI(British American Insurance), represent approximately
two-thirds of total industry assets. Investment in overseas
assets is limited to 25% of total assets, except for foreign
life insurance companies and general insurance business
which are not allowed to invest in overseas assets.
Holdings by foreign investors in Government Securities
stood at MUR 59 million as of 30 June 2009.
Retail investors can access the Government market in thefollowing ways: auctions on the primary market; the Stock
Exchange; Primary Dealer System; and over-the-counter(OTC) at the BOM.

Primary Market
Securities of the Government of Mauritius are currently
available to the public in the primary market. Direct purchases are made through any of the 12 primary dealers
operating under the Primary Dealer System. Applications
from individuals and non-financial institutions should
be made through banks or licensed stockbrokers offering these services. The minimum bid amount is MUR
100,000, with multiples thereof. Government securities
are underwritten by the BOM in the primary market at
non-competitive prices.

104

Mauritius

Maturity Profile for outstanding issues as at June30, 2009
60

Billions

50
40
30
20
10
0

0-1 year

1-3 years

3-5 years

5-10
years

10-15
years

15-20
years

Source: Bank of Mauritius

Secondary Market

The Central Bank owns a portfolio of Treasury bills whichis occasionally used in the secondary market to allow
market participants to adjust their liquidity between
the weekly primary Treasury bill auctions. A window isalso available at the Central Bank for individuals on the
OTC market.
Primary dealers are required to quote continuous 2-way
prices and the maximum spread has been set at 30 basis
points. The most liquid part of the curve has been the
301 to 364 day band, but no long-term benchmarks havebeen established yet. Secondary market trading is done
both on-exchange and over-the-counter. Pre-trade prices
are available on the website of primary dealer banks
while post-trade prices can be found on the BOM website,
Reuters’ screens and in monthly bulletins.

Apart from the Stock Exchange of Mauritius and OTC
markets, secondary trading also takes place on the Bankof Mauritius’ secondary market unit.

 Foreign Exchange Market
Mauritius has a managed floating foreign exchange regime. The Mauritian Rupee is fully convertible. Boththe current and capital accounts are fully convertible.
There are no reporting requirements for investors, bothresident and non-resident, to move funds in or out ofMauritius. Intervention in the foreign exchange market
by the Central Bank is not aimed at offsetting market
forces but at smoothing out unwarranted volatility. The
IMF has recently proposed to reclassify the exchange rate
regime from managed float to free float.
Only fully-licensed dealers can trade in the foreign exchange markets. In addition to the 18 commercial banks
which carry out foreign exchange activities as part of theirbanking business, there are 5 licensed foreign exchange
dealers and 12 licensed money changers. The average daily
market transaction volume is USD 24 million with transaction sizes ranging from USD 200,000 to USD 500,000.
The most frequently traded pair is USD/MUR.

The graph below shows the historical levels of the MUR
against the USD.
MUR per Unit of USD (Year End)
35

30

25

Dec 2004

Dec 2005 Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg Derivatives Market
The Mauritius Market has interest rate and currency derivatives, but the volume is not large. FX forwards exist
with moderate liquidity and tenors extending up to 12
months. The Global BoardOf Trade Ltd. (GBOT) which is an international multi-asset
derivatives exchange will shortly be offering a basket ofcommodity and currencies derivatives for trading on its
platform.

Mauritius

105 Regulation and Taxation
Regulation
The Bank of Mauritius regulates and supervises the banking industry. Regulation of the securities market, thepension sector and insurance sector falls under the the
Financial Services Commission.

Taxationfrom securities in Mauritius. Mauritius has signed double
taxation treaties with foreign Governments and so far it
has concluded 33 tax treaties. Interest income is deductible
at source on investments above MUR 2 billion. Legislation
on tax may be obtained on the website of the Mauritius
Revenue Authority (MRA) at http://www.gov.mu. Thereis no capital gains tax on fixed income securities.

A 15% withholding tax exists for bond market investors.
Non-residents are subject to income tax on interest earned Clearing and Settlement
The clearing and settlement system is managed by the
Bank of Mauritius through the Mauritius AutomatedClearing and Settlement System (MACSS). Primary market
settles on same day value for Treasury bills and T+2 forTreasury notes and bonds. The secondary market normallysettles T+1 but can also be settled on same day. Most
securities are dematerialized (book entry system) with
DVP execution on a gross settlement basis.

Custodial function is performed by the Bank of Mauritius
for the primary market and primary dealers for part ofthe secondary market. All investors have their record on
the central depository and may appear as sub-accountsof settlement agents.

 Regulatory Contacts
Bank of Mauritius Bank of Mauritius
Tower Royal Street
Port Louis
Mauritius
Tel: +230-202 3800/3900
Fax: +230-2089204
E-mail: bomrd@bow.intnet.mu
Website: http://bom.intnet.mu

The Financial Services Commission
4th Floor, Harbour Front Building, President John Kennedy
Street, Port Louis, Mauritius
Tel: +230-2107000
Fax: +230-2087172
Website: www.gov.mu

The Stock Exchange of Mauritius
4th Floor, One Cathedral Square Building, 16, Jules Koenig
Street, Port Louis, Mauritius
Tel: +230-2129541
Fax: +230-2088409
E-mail: stxbeni@intnet.mu
Website: www.semdex.com

Morocco
IBERIIAN PENINSULA

2009 at a glance

TangerPopulation (mln)

32.0

Population growth (annual %)1.2

Official language

ATLANTIC OCEAN

Rabat
Casablanca

Fès
MeknèsArabicCurrency

Marrakech

Moroccan Dirhams(MAD)

GDP (Current US$ bn)

92.2

GDP growth (annual %)5.1

GDP per capita (Current US$)2,882.9

External Debt (US$ bn)

19.8

External Debt/GDP (%)

21.5

CPI

1.5

Exports of Goods and services (% of GDP)

32.3

Gross Official Reserves (in US$ Bn)

21.9

Gross Official Reserves (in months of imports)

7.2

MAD / 1 USD (Year End)

Agadir

El Aaiún

MAURITANIA

7.9024

Sovereign rating as at March 24, 2010
Local Currency

Foreign Currency

Fitch

BBB

BBB-

Moody’s

Ba1

Ba1

S&P

BBB+

BBB-

Source: Bloomberg

Summary»» Government yield curve has tenors up to 20 years with six benchmark points.
»» Growing diversified investor base with marginal presence of foreign investors.
»» Weekly Auction of Treasury bills and bonds.
»» Average transaction size on the secondary market is MAD 70 million.
»» Bloomberg and Reuters codes for market data:• Reuters : Morocco, Bam / Mon 01->10, Bam/Fx01• Bloomberg: Cbom

MOROCCOALGERIA

Source: AfDB, Bloomberg

Long-term

WahranOujda

Sidi Bel
Abbès

108

Morocco Monetary Policy and Money Market
Monetary policy

Money Market

Established in June 1959, the Central Bank of Morocco(Bank Al-Maghrib) formulates and implements monetary
policy through open market and Repo operations with themain objective of price stability. No quantitative inflationlevel is targeted. The operational objective of policy decisions is to influence the interbank rates through the theprime rate and reserve requirements. Monetary policy
decisions, mainly the modification of the prime rate
and the reserve requirement, are taken at the quarterly
Monetary Policy Committee (MPC the Board of BankAlMaghrib) meeting. The outcome of the MPC meetings
are published quarterly.

The main components of the Moroccan money market are
the Repo market, Commercial paper market and certifciatesof deposit. Other compo nents include the uncollateralizedinterbank and Treasury bills markets.
The interbank market benchmarks are the Weighted
Average Interbank Rate (WAIR) and 90-day and 180-day
Treasury bill rates.

 Fixed Income Market
Government Securities
Fixed income instruments are Treasury bills and bonds.
Treasury bills with maturities between 7 and 364 days
are issued on a weekly basis, while Treasury bonds areissued every fortnight for tenors ranging from 2 years to
30 years. All securities are dematerialized.
The details of Government debt issuance are summarized
in the table below.

Government securities yield curve as at 30-June
2007, 2008 and 20095%

4%

Auction details
T-bills

T-bonds

Auction frequency

Weekly, every
Tuesday

Fortnightly

Auction method

Dutch

Dutch

Settlement cycle

T+6

T+6

AccessMinimum bid
amountForeign investors

3%

91-d

182-d

1-y

30-Jun-09

2-y
30-Jun-08

3-y

5-y

10-y

15-y

20-y

30-Jun-07

Source: Bank Al-Maghrib

open to all investors
100 000 dirhams

Non-Government Securities
The Moroccan market has corporate issues with maturities that range from 7 days to 30 years.

Eligible

As of 31 July 2009, the total outstanding Government debt
was MAD 252 billion, with more than 53% maturing within
5 years, 21% between 5 and 10 years and 24% between
10 and 20 years. Interest on Government securities ispayable annually with bullet repayment of the principal.
The opposite graph illustrates the changes in the Government yield curve over the last three years.

Certificate of Deposit (CDs) issued by banks have tenors
between 10 days and 7 years whereas Commercial Paper(CPs) is issued with a maximum maturity of 1 year. Thereis no municipal bonds market in Morocco.

Intermediaries
There are no restrictions to participation in the primarymarket.
All investors, including foreign investors, have equal accessto the primary and secondary debt market via primaryMorocco

109

dealers selected by the Bank Al-Maghrib. Primary dealers
have a responsibility of providing liquidity to the market
by executing a minimum number of transactions eachyear for their clients.

Investors
The Moroccan debt market is very active with a diversified
investor base including insurance companies, commercial
banks, Bank Al-Maghrib, foreign investors, and others.
As of 31 July 2009, the main investors were Insurance
Companies (33%), Mutual funds (25%) and Commercials
banks (16%). Foreign investors’ participation is marginal
and Bank Al-Maghrib intervention is limited to the secondary market.

Primary Market
The Kingdom of Morocco and major corporations (including financial institutions) regularly issue debt in the local
capital market to fulfil their financing needs at competitive prices.

Secondary Market
The secondary market in Morocco is relatively liquid
and operationally efficient. The trading volume declined
steadily from MAD 100 billion in 2004 to MAD 74 billion
in 2008 and MAD 54 billion during the first semester
2009. Similarly, turnover market activity dropped bymore than 20% over the same period. Public and private
sector securities are traded over-the-counter and prices
are quoted either in MAD or as a percentage of notional.

Holdings by category of investor as at June 30,
2009 (in percent)Insurancecompanies,
26.9%

Commercial Banks,
25.8%

Pension &Mutual Funds
31.3%

Others, 15.6%

Bank al-Maghrib, 0.4%

Source: Bank Al-Maghrib Foreign Exchange Market
The Moroccan Dirham (MAD) is pegged to the value of abasket of currencies, reflecting the country’s key trading
partners. These currencies are the Euro and the USD, withweights of 80% and 20% respectively.
Bank Al-Maghrib intervenes in the market to keep rates
within a trading band of +/0.3% around the target ratethat is set daily.
The opposite graph provides historical levels of the MAD
against the USD.

MAD per Unit of USD (Year End)
10

8

6

Dec 2004

Dec 2005

Source: Bank Al-Maghrib

Dec 2006

Dec 2007

Dec 2008

Dec 2009

110

Morocco Derivatives Market
The Moroccan onshore derivatives market comprises
mainly foreign exchange forwards, forward rate agreements (FRAs) and interest rate swaps. Following thecurrent account liberalization reforms in 2008, forward
exchange contracts and cross-currency forwards are now
available to commercial banks and other financial operators
for unlimited maturity. However, FX options are limited
to tenors of up to 12 months. There is an onshore foreignexchange tax of 0.1%

As a hedge against interest rate risk, resident borrowers
are allowed to contract interest rate swaps up to two years,
and forward rate agreements for a tenor of six months
cash in 6 months (6x6).
There is a small offshore market limited to spot andforwards of up to two years.

 Regulation and Taxation
Regulation
The Moroccan financial system’s regulatory framework
is divided into two main components:(i) The “Conseil Déontologique des Valeurs Mobilières”,
which supervises the Casablanca Stock Exchange (CSE),
while the “Association Professionnelle des Sociétés deBourses” (APSB) formulates the rules and procedures for
trading;(ii) Bank Al-Maghrib, the Central Bank, which supervises
the banking and insurance sectors, in coordination with
the Ministry of Finance that approves commercial banks’licenses.

Taxation
In general, interest income attracts withholding tax atsource while capital gains are subject to corporate tax.

 Clearing and Settlement
Established in 1997, Maroclear is the Central Securities Depository. The Treasury and Bank Al-Maghrib are amongst
its shareholders, with a participation of 25% and 20%,
respectively. Maroclear’s key functions include acting as
the securities custodian and overseeing the delivery andpayment system. Securities are identified with ISIN codes,
entirely dematerialized, and automatically settled using

the Delivery versus Payment (DVP) method. Clearing isdone in bulk at business closing date.
Day-count conventions are maturity based. Act/360 isapplied for maturities lower than one year and Act/Act isapplied thereafter. Securities are settled on T+6.

 Regulatory Contacts
Bourse de Casablanca

Central Bank of Morocco

Angle Avenue des Forces Armées Royales et Rue Arrachid
Mohamed, Casablanca, Morocco Tél: 212-22-45626/27
Fax: 212-22-452625
E-mail : contact@casablanca-bourse.com
Website: www.casablanca-bourse.com

277, Avenue Mohamed V, Rabat-Morocco
Tél: 212-37-702626
Fax: 212-37-707838
E-mail : gouverneur@bkam.gov.ma
Website: www.bkam.ma

Morocco

Le conseil Déontologique des Valeurs
Mobilières
6, rue Jbel Moussa, Agdal Rabat
Tél : 212-37-688900/01/02
Fax : 212-37-688946
E-mail: earchid@cdvm.gov.ma
Website: www.cdvm.gov.ma

111

Mozambique
22.9

Population growth (annual %)2.3

Official language

D.R. OF CONGO

Population (mn)

R.D. DU CONGO

2009 at a glance

Currency

TANZANIA
Lake Nyasa

Portuguese

Lubumbashi

Metical (MZN)

GDP (Current US$ bn)

13.7

GDP growth (annual %)4.3

GDP per capita (Current US$)MOZAMBIQUEZAMBIA
MALAWI
Lilongwe

NacalaNampulaLusaka600.2

Blantyre
Tete

5.2

Total Debt/GDP (%)

37.9

CPI (annual %)6.2

Exports of Goods and services (% of GDP)

20.9

Gross Official Reserves (in US$ bn)

1.5

Gross Official Reserves (in months of imports)

4.1

MZM/ per 1 USD (year end)

30.2000

HarareQuelimane
ZIMBABWE
Beira

BOTSWANA

Total Debt (US$ bn)

Pietersburg
INDIAN OCEAN

Source: AfDB, Bloomberg

SOUTH AFRICA
Xai-Xai
MbabaneSovereign rating as at March 24, 2010
Long-term

Local Currency

MaputoSWAZILAND

Foreign Currency

Fitch

B+

B

Moody’s

Not rated

Not rated

S&P

B+

B+

Source: Bloomberg

Summary»» Mozambique’s financial system has witnessed impressive growth in recent years.
»» There is a nascent fixed income market that includes both sovereign and corporate bonds.
»» Governmental issuance is composed of Treasury bills as well as longer term Treasury bonds, with maturities of

up to 10 years.
»» The investor base is dominated by commercial banks.
»» The secondary market is still underdeveloped and is transacted at the Mozambique Stock Exchange (BVM).
»» There is a benchmark yield curve which is computed by the Central Bank.

114

Mozambique Monetary Policy and Money Market
Monetary policy
The Central Bank, the Banco de Mozambique (BDM),
is responsible for keeping inflation under control. The
BDM uses Treasury bills sales to contain liquidity andforeign exchange sales to control inflation resulting fromimported goods.1 At the moment, the Central Bank does
not issue bills.

The BDM focuses on maintaining monetary aggregates
at a sustainable level. It is considering switching its focus
to an explicit inflation-targeting policy.

Money Market
The Interbank Money Market is still embryonic with
only 6 out of 14 banks adhering to the Maputo Interbank
Offered Rate (MAIBOR) agreement.

1 Source: OECD, African Economic Outlook 2009: Country Notes
Volume 1 and 2.

 Fixed Income Market
Government Securities
There are various Treasury bills available: 91, 182 and 364
days. These instruments are sold primarily to commercial
banks in the context of the Central Bank’s open market
operations. The allocation of 91-days bills increased by
108% in 2008 and corresponded to 11.2 % of total outstanding Treasury bills. The amount subscribed for 364-days
bills was 56.4% of the total outstanding, while 182-days
bills accounted for 32.1% of total Treasury bills in 2008.
Government bonds have existed since 1999. From 1999
to 2009, a total of 10 Treasury bonds were issued by
the Government and listed on the Stock Exchange. The
maturities of Treasury bonds extend from 3 to 10 years.
There is also one perpetual Treasury bond.
The graph below illustrates the maturity profile of Government of Mozambique securities.
Maturity profile of Government of Mozambiquesecurities as at June 30, 2009 (in Meticais)
Source: Bank of Mozambique
25

Billions20

Non-Government Securities
The number of companies using bonds as a source offinancing is still small and limited to a few key sectors:
financial sector companies, insurance companies andtelecommunication companies.

Intermediaries
The primary dealers for T-Bills are commercial banks, themajority of which are foreign-owned, namely Standard
Bank, Millennium Bim, BCI and Barclays.
Government and Corporate Bonds are transacted in thestock exchange. There is only one dealer operating inMozambique, the “Banco Portugues de Investimento”(BPI Dealer). All other brokers in Mozambique are partof commercial banks.

Investors
The investor base is mostly composed of commercial
banks. As of early 2010, there were 14 banks operatingin the country.
There are also some insurance companies and a small
number of investment management institutions activein the market.

15
10
5
0

The amortization profile of Government and Corporate
bonds is varied. Interest rate payments are usually floating.

0-1 year

1-3 years

3-5 years 5-10 years 5-15 years 15-20 years
TenorMozambique

115

Holdings by category of investor as at June 30,
2009 (in percent)Central Bank 8%
Non bank
financial
16%

Commercial Banks
76%

Source: Mozambique Stock Exchange (BVM, 2009) Foreign Exchange Market
The Mozambican Metical (MZM) is an independent,
freely floating currency. Access to foreign exchange wasliberalized by the approval in 1996 of a new Exchange
Control Regulation Law.

MZM per Unit of USD (Year End)
Source: Bloomberg
35

30

Foreign exchange retention accounts are permitted forthe entirety of foreign exchange earnings.
Investment registration and repatriation application procedures must be adhered to in order to repay foreign loans
and repatriate invested capital, profits, and dividends inexcess of USD 5,000.

25

20

15

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

The opposite graph illustrates the historical levels of the
Metical against the USD.

 Derivatives Market
There is no derivatives market.

 Regulation and Taxation
Regulation
In 1998 the Government of Mozambique developed a securities market regulation. One year later, the Mozambique
Stock Exchange (BVM) was incorporated and started its

operations. The BVM is a public institution under theguardianship of the Ministry of Finance.

116

Mozambique

The Central Bank is the entity responsible for the supervision and surveillance of both the primary and secondary
securities market, as well as all market operators.

Taxes applying to fixed income vary according to theissuing conditions of each instrument.

Taxation
The following taxes are applicable to investment income:corporate capital gains tax rate of 32%, withholding tax
interest of 20%, and personal capital gains tax of 32%.

Clearing and Settlement
Trading, clearing and settlement are carried out via anelectronic system. Since 2000, a remote trading network

system with direct access to the trade session allows
stockbrokers to trade via the internet.

Regulatory Contacts
Banco de MoçambiqueBolsa de Valores de MoçambiqueAv. 25 de Setembro 1695, P.O. Box423, Maputo, MozambiqueTel: +258-21-354600 or +258-21-354700
Fax: +258-21-323712
E-mail: cdi@bancomoc.mz
Vasco.mepula@bancomoc.mz
Website: www.bancomoc.mz

Avenida 25 de Setembro No. 1230,
5º Andar, Bloco 5
Maputo, MoçambiqueE-mail: jussub@bvm.co.mz
matsinhe@bvm.co.mz
rparuque@bvm.co.mz

Namibia
2009 at a glance
Population (mn)

2.2

Population growth (annual %)1.9

ANGOLAZAMBIA

Rundu

Official language

EnglishCurrency

TsumebNamibia Dollar (NAD)GDP (Current US$ bn)

8.2

GDP growth (annual %)-1.4

GDP per capita (Current US$)

Otjiwarongo

Swakopmund

Windhoek

3,765.7

Total Debt (US$ bn)

2.2

Total Debt/GDP (%)

26.5

CPI (annual %)9.0

Exports of Goods and services (% of GDP)

43.1

Gross Official Reserves (in US$ bn)

1.5

Gross Official Reserves (in months of imports)

5.1

NAD/ per 1 USD (year end)

BOTSWANANAMIBIAATLANTIC
OCEAN

Gaborone

Keetmanshoop

SOUTH AFRICA

7.3980Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

BBB

BBB-

Moody’s

Not rated

Not rated

S&P

Not rated

Not rated

Source: Bloomberg

Summary»» Namibia’s financial sector is well established, with close links to South Africa by virtue of its membership of theCommon Monetary Area (CMA).
»» A benchmark yield curve can be recreated using Government bonds with maturities ranging from the years 2012

to 2024.
»» Although the Government and parastatal entities are the main issuers, there are also a few commercial banks
tapping the market.
»» There is a wide range of investors in the fixed income market. They include banking institutions, fund managers,
insurance companies, stock brokers and public enterprises.
»» Reuters codes for market data: BONNA1, BONNA2 and BONNA4.

118

Namibia Monetary Policy and Money Market
Monetary policy
Monetary policy in Namibia is supported by the fixed pegof the Namibia Dollar to the South African Rand.
The main goal of the Central Bank is to achieve pricestability.

Since its launch, the facility has progressively replaced
the existing intraday and overnight repos as a preferredfinancing solution for local banks.
In addition, the Bank of Namibia prints bills benchmarked
on the 91-day Treasury bills rate. These bills are available
exclusively to banking institutions.

The Bank of Namibia uses several tools to implementmonetary policy. The Central Bank’s main operational
instruments are the repo rate and a seven day repo facility
was put in place in 2008.

 Fixed Income Market
Government Securities
Government issued paper constitutes a large portion(approximately 67%) of the long-term securities’ market
in Namibia. This is partly the result of a long-standing
Government decision to fund the fiscal deficit in the local
market, in order to promote the development of a native
financial market. None of the Government bonds arecallable or have other special features. The graph below
illustrates the Government Yield Curve as of June 30th ,2007, 2008 and 2009.
Government securities yield curve as at 30 June,
2007, 2008 and 2009
Source: Bank of Namibia
12%

Yield

and 2024. The 2024 instrument is the longest existing
maturity in the market. Since 2006, the Government sets
funds aside in a sinking fund for the redemption of maturing bonds: the IRS Redemption Account. This measureensures that the principal will be available when due forredemption without exerting unnecessary pressure on
the financial resources of Government. From the investor’s perspective, this account instils greater confidence
in the country’s ability to repay the principal. The latest
three bonds maturing in 2007, 2008 and January 2010
were redeemed using proceeds from this account. Due tothe size of the local bond market, close trading ties with
South Africa and low bond market liquidity, Namibianbonds are traded at a spread relative to the prevailingyield on the corresponding benchmark bond in South
Africa. Government bills and bonds are transacted via aBook Entry System (BES) in which records of ownershipare electronically kept.

10%

Maturity profile of Government of Namibia
securities as at June 30, 2009 (in NAD)
8%
6

6%

Billions

5
91 day 182 day 1 year 2 years 3 years 5 years 10 years 15 years
Tenor
30-Jun-09
30-Jun-07
30-Jun-08

4
3

Treasury bills are issued on a discount basis for maturitiesof 91, 182 and 365 days. The Republic of Namibia issues
bonds known as Internally Registered Stock (IRS). The
first bonds were printed in 1992 and had maturities ofless than six years. Currently, there are four outstanding
Government bonds, with a total notional of NAD 5.4 billion. These instruments will mature in 2012, 2015, 20182
1
0

0-1 year

1-3 years

Source: Bank of Namibia

3-5 years 5-10 years 5-15 years 15-20 years

Namibia119

Non-Government Securities
The issuance of bonds by parastatals, commercial banks
and other institutions has increased noticeably in recent
years. The total outstanding amount in corporate bonds
increased from NAD 360 million in 2004 to NAD 2.7
billion in December 2009. Seven parastatal bonds accounted for 58% of non Government issuances, with theremaining 42% composed exclusively of issues by threecommercial banks.

Holdings by category of investor as at June 30,
2009 (in percent)Commercial
Banks
19.22%

Non bank
financial institutions
80.78%

Intermediaries
The Central Bank acts as an agent for the Government for
the issue and redemption of Republic of Namibia bonds.
Parastatals, banks or companies are allowed to issue
bonds directly.

Source: Bank of Namibia

In addition, all bonds are listed on the Namibia Stock
Exchange (NSX). Interested participants can buy and/or
sell bonds on the NSX through qualified and registeredstockbrokers.
The number of secondary market transactions has stepped
up in recent years. The turnover ratio for Government
bonds increased from 11 % in 2004 to close to 21% during 2009.

Investors
The investor base is composed primarily of asset managers investing on behalf of pension funds, as illustrated in
the chart below. Insurance companies, banks and somelarger parastatals are also active institutional investors.
Most of these institutions are privately owned with strong
links to South Africa.

The banking sector is quite active and mature. Out of theexisting four commercial banks, three are partly foreign
owned. In addition, there are a few specialized banks:
Agribank (an agricultural bank), Nampost Savings Bankand the Development Bank of Namibia. The combined
assets of commercial banks were approximately USD 6
billion in June 2009.
The Namibian insurance sector includes more than 15
long-term insurers, a similar number of short-term insurance companies and one re-insurer. There are close
to 40 asset management companies and 10 unit trust
management companies. Other non-bank financial institutions comprise 135 pension funds, of which 10 are
umbrella funds.
Non-resident capital flows are generally unrestricted.

Foreign Exchange Market
Namibia is a member of the CMA together with South
Africa, Swaziland and Lesotho. Since the Namibia Dollar (NAD) is pegged at par with the South African Rand,
Namibia follows the exchange rate policy determined by
the South African Reserve Bank.

NAD per Unit of USD (Year End)
10

8Both the Namibia Dollar and the South African Rand arelegal tender in the country. The Namibia Dollar is convertible regionally into the Rand, but it is not convertible
internationally.
Non-resident capital flows are generally unrestricted;
capital, profits and dividends can be repatriated; and exchange control limitations apply to resident capital flows.
The graph below provides historical levels of the NADagainst the USD.

64

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

120

Namibia

Derivatives Market
Although Namibia does not have a derivative exchange,
there are no restrictions for market participants to conduct
over-the-counter derivatives.

Regulation and Taxation
Regulation
Regulatory oversight is shared between various public
institutions. The Bank of Namibia (BON) has regulatory
authority for the banking sector in the country. The
Namibia Financial Supervisory Authority (NAMFISA) is
responsible for the pension sector, the insurance sector
and capital markets. Issuance of corporate bonds is also
regulated by NAMFISA.

Taxation
Capital gains are usually not taxable. Determination of
the taxability of capital gains falls under the mandate of
the Inland Revenue. Capital gaines are taxed when they
are realised.

The Namibian Income Tax Act exempts interest income
from Treasury bills and bonds, received by or accrued toeither any person (other than a company) or any external
company not carrying on business in Namibia is exempt
from tax., from TBs and bonds issued by the Government or any representative authority or local authority
in Namibia.
The Income Tax law stipulates that the withholding tax
of 10% on interest must be paid for the benefit of the State
Revenue Fund by any person (other than a Namibiancompany).

Clearing and Settlement
Settlements by commercial banks can be made through
NISS (Namibia Inter Bank Settlements System), or authorizations to debit the accounts of those banks with the Bankof Namibia. For others, i.e. businesses and individuals,
settlement can be made in the form of bank cheques.
Personal cheques and cheques certified or guaranteed bybanks are not acceptable for settlement. All amounts paidby individuals exceeding NAD 5 million should be paid
through the NISS system.
Successful bidders are required to provide payment at
the Bank of Namibia, not later than 10.00 hours on thenext business day following the announcement of theallotment on the auction date.

Regulatory Contacts
Bank of Namibia

Namibia Stock Exchange

P.O. Box 2882, Windhoek, Namibia
Tel: +264-61-2835111
Fax: +264-61-2835151
Website: www.bon.com.na

P.O.Box 2401, Windhoek, Namibia
Tel: +264-61-227647
Fax: +264-61-248531
E-mail: info@nsx.com.na
Website: www.nsx.com.na

Nigeria
2009 at a glance
Population growth (annual %)2.3

Official language

EnglishCurrency

Naira (NGN)

NIGER

NiameyN'Djamena
Kano

BENIN

GDP (Current US$ bn)

GDP per capita (Current US$)

Abuja

3.0

Llorin1,120.7

OshogboIbadanTotal Debt (US$ bn)

4.9

Total Debt/GDP (%)

2.8

CPI (annual %)10.1

Gross Official Reserves (in US$ bn)

47.2

Gross Official Reserves (in months of imports)

12.3

NGN/ 1 USD (year end)

149.50Lagos
CAMEROON

Uyo

MalaboATLANTIC OCEAN

YaoundéEE

30.1

Porto Novo

G U IN

Exports of Goods and services (% of GDP)

Maiduguri

NIGERIA

173.4

GDP growth (annual %)

CHAD

EQ

UA

T. EQ
. G U IN E A

GABON CONGO

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

BB

BB -

Moody’s

Not rated

Not rated

S&P

B+

B+

Source: Bloomberg

Summary»» Government securities yield curve has tenors up to 20 years. The benchmark points are 91 and 182-day for

Treasury bills and 3, 10 and 20-year for Treasury bonds.
»» The Debt Management Office (DMO) publishes a quarterly issuance calendar.
»» The secondary market is dominated by banks and discount houses and has increased liquidity.
»» Custody of Treasury bills is with the Central Bank of Nigeria (CBN) while the Central Securities and Clearing

System (CSCS) holds the Treasury bonds. Settlement is with the CBN and is at T+1 cycle for Treasury bills andT+2 cycle for Treasury bonds»» Challenges currently being addressed include the need to the develop the interbank bond Repo market and to
reduce the high issuance costs for corporate bonds, efforts to address these are at advanced stages.
»» Bloomberg and Reuters codes for market data:• Bloomberg: BTMM NG, NGN Curncy, NIGB Corp, NGSEINDX Index.
• Reuters : NGN/USD, NGNIBOR, NGNFIXCENTRAL AFRICAN REP.

154.7
BURKINA FASO

Population (mn)122

Nigeria Monetary Policy and Money Market
Monetary policy
The aim of monetary policy is to develop a market-oriented
financial system for effective mobilization of financial
savings and efficient resource allocation. This is achieved
by market-based approaches, by targeting monetary aggregates through open market operations for monetaryand price stability in the medium term. Other policy instruments include minimum reserve requirements, discountwindow, foreign exchange intervention and control of
the flow of public sector deposits in and out of banks.

For the period July 2009 to 31 March 2010, the Central
Bank of Nigeria (CBN) influenced the short-term money
market rates from overnight to 3 months through caps
and floors around the monetary policy rate (MPR). During
this period all interbank deposits and pension fund placements were guaranteed by the CBN. These were policy
responses to the need to increase interbank liquidity andreduce spreads in the money market.

The CBN is also mandated to maintain foreign competitiveness of the Naira (NGN), supervise the financial system,
act as lender of last resort to the banking system and anadvisor to Government.

The 91-day NIBOR is the most frequently used money
market benchmark for debt issues with less than 5 years
to maturity. This benchmark can be volatile and someissuers and investors have preferred the 91 and 182-day
Treasury bills.

Money Market Fixed Income Market
Government Securities
National Treasury bills (NTB) are issued by the Central
Bank of Nigeria, with authority from the Debt Management Office (DMO). Tenors issued are 91, 182, and 365-day
bills. In the shorter part of the yield curve, issuance emphasis is on the 365-day bills. Treasury bills are auctioned
on a weekly basis on a multiple price system and settle
on a T+1 cycle. Treasury Certificates (NTCs) are similar
to Treasury bills but are medium-term instruments withtenors of 1 and 2 years.

there have been several tenors issued at the same auction.
The minimum bid amount for Government bonds is NGN
10,000 (approximately USD 67), with multiples of NGN
1,000 thereafter. Total bonds’ outstanding volume as at
30 June 2009 was NGN 2,81 billion (USD 18.8 billion).

Federal Government of Nigeria Bonds (FGN) have similar
issuance guarantees as the Treasury bills and certificates,with tenors of 3-, 5-, 7-, 10and 20-years. All these instruments are fixed rate instruments, issued in accordancewith a set issuance calendar. Auctions typically occur oncea month and are allotted at a single price. Only primary
dealers can take part in primary auctions. Any investor
looking to bid for bonds at the auction needs to go througha primary dealer. All Government bonds are listed on the
Nigeria Stock Exchange. Bonds are reopened regularly to
improve their liquidity.

Maturity Profile for FGN securities as at June 30,
2009

A quarterly calendar is published in advance by the DMO
indicating the dates and amounts per tenor to be issued
and whether or not the issues will be reopened. Lately

Issuance volumes are highest in the short end of the curve(
up to 1 year) or for longer-term securities, with maturities
exceeding 3 years, as seen in the graph below.

Source: Data from CBN – currency is Nigerian Naira
Billions
1,200
1,000
800
600
400
200
000

0-1 year

1-3 years

3 years and over

Nigeria

123

The graph below illustrates the FGN securities yield curveas at end of June 2008 and 2009.
Government securities yield curve as at 30 June2008 and 2009
Yield

to this has been the high issuance cost for bonds in themarket. Other impediments include the illiquid nature of
the market as well as the unavailability of tax exemption
status that is conferred on FGN Bonds. Issuance costs havebeen reviewed downwards and more issues are expectedin the corporate bond market in the coming years.

15%

Companies often finance their operations through Banker’s
acceptance and Commercial paper (CP) though these are
not actively traded at present and there is no liquid market
for Negotiable certificates of deposit and promissory notes.

12%

9%

6%

3%

91 day182 day

30-Jun-09

1 year

2 years

5 years

30-Jun-08

10 years 20 years
Tenor

Tenors for Commercial paper are typically 30 to 180
days and are sold either clean or guaranteed. Clean CP
will attract higher interest costs to the issuer. The CBN
recently restricted the tenure for commercial bank CP for
both issuance and rollover to a maximum of 270 days.

Source: Data from CBNState Government bonds are issued by state Governments
for development projects. Ten of the 36 states have issued
bonds. The most recent bond issues have been by Kwara,
Lagos, Imo, Niger and Kebbi.

Typically these bonds have tenors longer than 1 year
and pay a fixed rate at a spread above FGN bonds forcomparable maturities. They are backed by the Federal
Government of Nigeria and can be used as collateral during Repos with the Central Bank.
The table below provides information on outstanding
debt stock per instrument.
FGN Domestic Debt Stock Outstanding as at
December 31, 2009

Securities and Exchange Commission rules require issuers seeking to enter the bond market to have a local
credit rating.

Intermediaries
The Primary Dealer System comprises 6 banks and 5
discount houses. These banks and discount houses appointed by the DMO act as authorized dealers in FGN
bonds. They are required among other functions to takeup, market and distribute primary issues of FGN bonds,
and provide for secondary market liquidity in FGN bonds
by making two-way quotes in all market conditions.
Brokers usually file applications for the listing of bonds
and obtain NSE approval. They also participate in bondtrading.

Investors

Instrument

Amounts in Billions of
Naira

Percentage

FGN Bonds

1,974.93

61%

NTBs

797.4825%

Treasury bonds

392.07

12%

Development Stock

0.52

0%

Promissory notes

63.03

2%

Total

3,228.03

100%

The holdings of FGN bonds by category of investors asof 30 June 2009 were as follows:
Holdings by category of investor as at June 30,
2009 (in percent)
Other 5%CentralBank
10%Source: Debt Management OfficeNon-Government Securities
Historically, manufacturing companies have been frequentissuers of debentures, but have been absent from themarket for the past decade as they sought funding fromthe banking sector and the equity market. Due to thepoor performance in the equity market in the last year,
many corporate borrowers are considering tapping the
fixed income market for funding. A main impedimentNon bank
public25%
Banks anddiscount houses
60%

Source: Central Bank of Nigeria – June 30, 2009

124

Nigeria

The banking sector is comprised of 24 deposit moneybanks, 6 discount houses and 5 development financeinstitutions. This sector is the major investor in FGN
securities with holdings of 60% as at the end June 2009.

The minimum bidding amount for non-competitive bids
is NGN 10,000 and the price is determined by demandand supply for the bonds.

There are 19 licensed specialist firms that manage pension
funds. The Pension fund industry is required to hold 65%
of its investments in Treasury paper. Pension funds canbe invested in bonds and any other Government security
without limitation. Up to 5% of pension fund assets canbe invested in eligible bonds/debt instrument issued byany one State Government. Current holdings of pension
funds in FGN securities is estimated at NGN 162.1 billion
as of November 2009. There has been growth in pension
funds’ investment in FGN securities.

In 2009 alone, the DMO issued different series of FGN
bonds going out to a 20-year bond – valued at NGN 726.5
billion. The DMO boosts liquidity in the bond market
through the continuous reopening of FGN bonds.

Nigeria adopted insurance sector reform as part of its economic restructuring program, which was implemented inseveral stages during 2004-2007. Insurance Companies caninvest up to 100% of their funds in Government securities.

The Primary Dealer System has provided significant liquidity to the bond market. The average deal size is estimatedat NGN 150 million. Typical daily turnover in the secondary bond market is estimated at around USD 800 million(USD 925 million for NTBs)1. For the whole of 2009, theturnover on FGN bonds traded OTC was estimated at NGN
18.51 trillion2. FGN bonds, particularly bonds with 3-years(56%), 5-years (40%) and 7-years maturities, continue todominate secondary market trading.

Foreigners are allowed to invest in the bond markets,but
are restricted to Government securities with a tenor of
1 year and above. However, holders of longer bonds caninvest in instruments of less than a year to maturity suchas commercial paper, bankers acceptances and negotiablecertificates of deposit. Foreign investors have a lock-in
period for the first investment of one year. Banks thatreceive foreign investments issue certificates of capital
importation (CCI) which allow repatriation of investment
funds and earnings.
Retail investors access Government securities throughmutual funds and sub-accounts of primary dealers. Investors hold individual accounts on the central depository.

Primary Market

Secondary Market
Historically, FGN bonds have been trading over-thecounter, although they are listed on the Nigerian Stock
Exchange with the purpose of facilitating retail market
trades.

Securities with combined issuance of less than NGN 75
billion trade in tranches of 50 million whereas thoseabove NGN 75 billion trade in tranches of 100 million.
The day-count convention is Actual/Actual.

1 Standard Chartered Bank Report – Guide to Nigeria Domestic
Bond Market 2009
2 2009 NSE report

Domestic Debt Outstanding by Holder as at December 31, 2009 in Billions of Naira
Instrument
FGN Bond

Central Bank

Banks and Discount Houses

Non-bank Public

Sinking Fund

Amount Outstanding

0.00

1,274.48

700.4500

1,974.93

Treasury Bills

1.90

0.00

644.78150.80797.48Treasury Bonds

258.250.00

0.00

133.82392.07Development Stock

0.00

0.10

0.32

0.10

0.52

Promissory Notes

63.03

0.00

0.00

0.00

63.03

Total

323.181,274.58

1,345.55

284.723,228.03% of Total

10.01%

39.48%

41.68%

8.82%

100.00%Source: Nigeria Debt Management OfficeNigeria125 Foreign Exchange Market
The Nigerian Naira is governed by a managed float policy
with no stipulated boundaries and is not fully convertible. Intentions of full liberalization have been expressed.
The market is a two-tier market: the CBN–authorized
dealer auction market and the interbank market. The CBN
window is a managed float via bi-weekly wholesale Dutch
auctions to authorized dealers. The interbank market isdriven by demand and supply. The spread between thetwo markets has narrowed significantly over the years
as the interbank rates normally follow the CBN–authorized dealer rates. Estimated daily transaction volume
approximates USD 100 million with spreads of 100 bps.

NGN per Unit of USD (Year End)
150

120

90

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg

The opposite graph provides historical levels of the NGN
against the USD.

 Derivatives Market
Foreign exchange forwards are subject to a maximum
tenor of three years, compared to 2006 when they were
only offered up to 180 days. Authorized dealers are now
allowed to engage in swap transactions between themselves or with retail/wholesale customers. These transactions – deliverable forwards and swaps are restricted toa maximum tenor of three years.

The non-deliverable forward market is underdeveloped
and has very poor liquidity. Tenors up to 6 months areavailable.
In 2006, the Abuja Commodities Exchange was set up to
develop the trading of futures and options on commodities,
although this is yet to become an active market.

 Regulation and Taxation
Regulation
The Securities and Exchange Commission (SEC) is the
apex regulator of capital markets, overseeing all operators, activities and transactions in capital markets. The
SEC specifically regulates the corporate bond and subsovereign bond markets.
The Debt Management Office (DMO) is authorized bystatute to issue FGN bonds on behalf of the Federal
Government. The DMO also regulates the activities of thebond market and the primary dealers/market makers andhas a mandate to carry reforms to make the Government
securities market more liquid.
The Central Bank of Nigeria (CBN) is the issuing houseand the registrar of FGN bonds.

All financial sector regulatory agencies in Nigeria are partof the Financial Services Regulation Coordinating Committee (FSRCC), which coordinates supervisory activities
across the financial sector.
Other regulators are the National Pension Commission(PenCom) and the National Insurance Commission (NAICOM).

Taxation
There is no tax on interest earned on Government securities. There is no capital gains tax on investments in thecapital markets. Interest on treasury bills is taxed as partof corporate interest income at the corporate income tax
rate. Interest income on Non-Government bonds attracts
withholding tax of 10% and is also taxed as corporate inter-

126

Nigeria

est income with consideration of taxes already withheld.
A proposal has been forwarded to the FGN to consider
applying tax exempt status to sub-sovereign and corporatebond issues. Interest earned on Commercial paper does
not attract withholding tax.

Tax rates are the same for both resident and non-resident investors. Nigeria has tax treaties with Czechoslovakia, France, the Netherlands, Pakistan and the United
Kingdom.

 Clearing and Settlement
The Central Securities Clearing System (CSCS) provides theelectronic book-entry clearing of all bonds traded on the
NSE and delivers all bonds traded on the OTC market. Settlement is facilitated by the Nigerian Interbank Settlement
System (NIBSS). The CSCS holds each individual accountseparately on the electronic register and therefore eachindividual investor can have an account with the CSCS or
as a sub-account under a general account. Settlement for
securities on the CSCS can be done through direct credits
into the CSCS accounts of bondholders.

Government bonds settle on a T+2 cycle and are dematerialized. The Central Bank of Nigeria Interbank Funds
Transfer (CIFT) enables the different settlement systems
to interlink to the Real Time Gross Settlement (RTGS) andenhance delivery versus payment. CIFT is also connected
to Euroclear and Clearstream. The CBN is the settlementbank for FGN and sub-sovereign bond issues.
FGN bonds are traded exclusively on the Reuters fixedincome trading platform. However, state and corporate
bonds are traded solely via OTC (without access to any
electronic platform as at the end of 2009).

 Regulatory Contacts
Central Bank of Nigeria

Securities and Exchange Commission

P.M.B. 0187, Garki Abuja, Nigeria Zaria Street, Garki,
Abuja, Nigeria Tel: +234-9-2342132-4/234332-6
Fax: +234-9-23435363
E-mail: info@cenbank.org
Website: www.cenbank.org

P.M.B. 315 Garki-Abuja, Nigeria
Tower 421, Constitution Avenue,
Central Business District, Abuja, Nigeria
Tel: +234-9-2346272-3
Fax: +234-9-2346276
E-mail: sec@secngr.org
Website: www.secngr.org

Nigerian Stock Exchange,
P.O. Box 2457, Lagos, Nigeria
Stock Exchange House, 8th, 9th and 23rd Floor, 2/4
Customs
Street, Lagos, Nigeria
Tel: +234-1-2660287
Fax: +234-1-2668724
E-mail: nse@nigerianstockexchange.com
Website: www.nigerianstockexchange.com

Debt Management Office Nigeria
NDIC Building (1st Floor),
Plot 447/448 Constitution Avenue, Central Business District,
P.M.B. 532, Garki Abuja, Nigeria. Telephone: +234-9-672
5629
Fax: +234-9-523 7396
E-mail: enquiries@dmo.gov.ng
Website: www.dmo.gov.ng

Rwanda2009 at a glance

UGANDA

10

Population growth (annual %)2.8

Official language

Kinyarwanda French
EnglishCurrency

KabaleDEMO. REP.
OF CONGO
Ruhengeri
ByumbaGoma

TANZANIA

Population (mn)GisenyiRwanda Franc (RWF)

GDP (Current US$ bn)

4.3

GDP growth (annual %)4.7

GDP per capita (Current US$)

426.9

Total Debt (US$ bn)

0.8

Total Debt/GDP (%)

19.6

CPI (annual %)8.5

Exports of Goods and services (% of GDP)

8.1

Gross Official Reserves (in US$ bn)

0.6

Gross Official Reserves (in months of imports)

5.0

Kigali
KibuyeGitarama

Gikongoro
Cyangugu
Butare

RWF/ per 1 USD (year end)

KibungoRWANDA
Kirundo

Ngara

BURUNDI571.24

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

B-

B-

Moody’s

Not rated

Not rated

S&P

Not rated

Not rated

Summary»» Rwanda has recently begun developing the necessary regulatory framework for stable and successful capital markets.
»» The fixed income market in Rwanda is at an early stage of development. Most of the existing bond issues are govern-

ment sponsored and relatively short term, with maturities not longer than three years.
»» In addition to liquidity management instruments such as Treasury Bills, and in order to develop a benchmark yield
curve, the Central Bank (National Bank of Rwanda) has lately started to issue longer dated securities.
»» Similarly to many other African countries, the investor base is dominated by commercial banks.
»» Information on interest rates is published in the Central Bank’s website.

128

Rwanda Monetary Policy and Money Market
The National Bank of Rwanda’s main policy goal is pricestability. This objective is achieved primarily by maintaining a tight control over money supply. Although noformal review process has been initiated, the Central
Bank is discussing the adoption of an explicit inflationtargeting policy.
The Central Bank controls banking sector liquidity via
overnight operations, 7-day operations, repurchasing
operations and the issuance of Treasury bills.1
1

All policy decisions are taken by a Monetary Policy Committee. There is no pre-established frequency for policy
meetings. Actions will be taken when needed and communicated subsequently.
The Central Bank publishes a semi-annual monetary policy
review for general information purposes.

African Economic Outlook, Rwanda

Fixed Income Market
Government Securities

Investors

There are two types of Treasury bills available in themarket: bills used for liquidity management purposes andbills used to finance the budget deficit. In both cases, theCentral Bank is the issuing agent and the maturities range
is 13, 26 and 52 weeks. The day discount basis is A/364.

The primary market is open to all investors, including
residents and non-residents, as long as they have bankaccounts in the country.

Bills are sold at a weekly auction conducted by the Central Bank. The minimum transaction size for bills andbonds is RWF 50 million for competitive bids and RWF
10 million for non-competitive bids. All subscriptions aredenominated in local currency.
In 2008, in an effort to expand the national yield curveand encourage the development of capital markets in the
country, the Government issued longer-term Treasury
bonds, with maturities of two and three years. These
instruments pay a fixed rate coupon and have a bullet
type repayment. The proceeds from the sale of Treasury
bonds were used to finance the budget.

The investor base is heavily dominated by commercial
banks, as seen in the chart below.
Holdings by category of investor as at June 30,
2009 (in percent)Pension funds 2%

Other
13%

Commercial Banks
83%

In addition to rolling over one of the 2-year bonds, theGovernment plans to issue 3 and 5-year bonds in 2010.

Intermediaries
The National Bank of Rwanda is the issuing agent onbehalf of the Government. There are no primary dealers
at present.

Insurance Companies 2%

Source: National Bank of Rwanda

Rwanda129

Foreign Exchange Market
The Rwandan franc (RWF) follows a managed float regime.
The National Bank of Rwanda has the authority to supervise and coordinate the foreign exchange market. The
Central Bank is also responsible for appointing authorizedbanks and foreign exchange dealers.
There are no exchange controls applicable to repatriationof foreign investments.
The opposite graph illustrates the historical levels of the
Rwandan Franc against the USD.

RWF per Unit of USD (Year End)
600

550

500

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg

Derivatives Market
Although currently there is no derivatives market in
Rwanda, there are plans to develop one in the future.

The foreign exchange forward market has been authorized, but is not yet in operation.

Regulation and Taxation
Regulation
The National Bank of Rwanda regulates the Fixed Incomeand Money markets.
Capital markets are under the supervision of the CapitalMarket Advisory Council (CMAC). The council’s mission
is to establish capital markets in the country.
As part of its statutory mandate, the National Bank of
Rwanda regulates and supervises banking activity. In 2007,

the Central Bank was given the mandate of supervisionand regulation of non-bank financial institutions including
pension funds and insurance companies.

TaxationInterest on securities, dividends and capital gains are alltaxable by 15%. A capital market policy on tax incentives
will soon be presented to lawmakers. It is expected thesetax incentives will boost the level of long term savings.

Clearing and Settlement
The Central Bank is in charge of clearing and settlementof Government securities. The delivery process is still
manual. The day after the transaction, the Financial

Markets Department of the Central Bank delivers the
securities to the beneficiary accounts.

130

RwandaRegulatory Contacts
Banque Nationale du Rwanda

Capital Market Advisory Council

B.P 531
Av. Paul VI KIYOVU KIGALI – RWANDA
Tel. :( +250)59142200/574282/501569
Fax :( +250)572551/577391/572961/576197
E-mail: info@bnr.rw
Website: www.bnr.rw

Ecobank Building
5th Floor, Avenue de la Paix
P.O. Box 6136 KIGALI – RWANDA
Tel.: (+250) 252 500 335
Website: www.cmac.org.rw

Sao Tome e Principe
2009 at a glance
Population (mn)

0.17

Population growth (annual %)1.6

Official language

Portuguese

Currency

Dobra (STD)

GDP (Current US$ bn)

0.2

GDP growth (annual %)4.0

GDP per capita (Current US$)1158.3

Total Debt (US$ bn)

0.08

Total Debt/GDP (%)

40.4

CPI (annual %)17.2

Exports of Goods and services (% of GDP)

9.7

Gross Official Reserves (in US$ bn)

N/A

Gross Official Reserves (in months of imports)

N/A

STD/ per 1 USD (year end)

SAO TOME E PRINCIPE

Santo
António
Portela de Lumiar

ATLANTIC
OCEAN
Príncipe
Guadalupe
Neves

TrinidadeSantanaSão João dos Angolares

São Tomé

16,814.49

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» The financial sector of Sao Tome e Principe is very small and composed of a few financial institutions.
»» The sector has expanded significantly since 2002: the number of operating banks increased from one in2002 to nine by 2008.
»» The Central Bank has actively tried to reform the banking system by implementing stricter requirements
on capital adequacy levels and credit management.
»» At present, there is no fixed income market in the country.

132

Sao Tome e Principe Monetary Policy and Money Market
The BCSTP uses foreign exchange auctions as a monetary
policy tool to control excessive accumulation of liquidity
and thereby control inflation.

The BCSTP uses foreign exchange auctions as a monetary
policy tool to manage excessive accumulation of liquidity
and thereby control inflation.

Foreign Exchange Market
The Central Bank is in charge of managing the Dobra(STD) exchange rate. The exchange rate is market basedand established via auction sales. The Government is
considering the adoption of a fixed currency peg against
the Euro. The new currency regime will replicate the pegof the Cape Verde Escudo. The peg will be protected bya standby credit line provided by Portugal.

STD per Unit of USD (Year End)
20,00015,00010,000The opposite graph illustrates the historical levels of the
Dobra against the USD.
5,000

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg

Regulation
The Central Bank has supervisory responsibilities over
all financial institutions, namely commercial banks, asset

Regulatory Contacts
Banco Central de Sao Tome & Principe
CP n°13
Praça da Independencia
Sao Tome e Principe
Phone: 00239-243700
Fax: 00239-222777
E-mail: bcstp@bcstp.st

management companies, foreign exchange dealers andinsurance companies.

Seychelles
2009 at a glance

Anse Mondon

SEYCHELLES

Silhouette

Population (mn)

0.08

Population growth (annual %)0.5

GlacisEnglish/French/Creole

Victoria
Amirantes Islands

Port Glaud

Currency

Seychelles Rupee(SCR)

Anse Royale

GDP (Current US$ bn)

0.5

Quatre Bornes

GDP growth (annual %)-10.2

GDP per capita (Current US$)6,268.0

Total Debt (US$ bn)

0.8

Total Debt/GDP (%)

147.6

CPI (annual %)27.5

Exports of Goods and services (% of GDP)

133.3

Gross Official Reserves (in US$ bn)

0.09

Gross Official Reserves (in months of imports)

1.1

SCR/ per 1 USD

Mahé

Ste-Anne
Bel Ombre

Official Language

Machabée

INDIAN
OCEAN

Providence Group
Cosmoledo
group
Farquhar Group

11.1730

Sovereign rating as at March 24, 2010
Local Currency

Foreign Currency

Fitch

B

B-

Moody’s

Not rated

Not rated

S&P

Not rated

Not rated

Félicité

Gd AnsePraslin* Preliminary estimate
Source: AfDB, Bloomberg

Long-term

Les Sœurs

Anse Lazio
AldabraIslands

Source: Bloomberg, Fitch

Summary»» Government securities yield curve extends to 10 years. Currently, the longest outstanding issue has 6 years tomaturity.
»» Treasury bill auctions are announced two months in advance by the Ministry of Finance. Currently, the issuanceof Treasury bonds and the publication of the auction calendar have been put on hold.
»» Secondary market trading is very limited.
»» There is a need to diversify the investor base from the dominant banking sector.
»» Custody of domestic Government securities is with the Central Bank of Seychelles and the settlement cycle is T+3.

La Passe
La Digue

134

Seychelles Monetary Policy and Money Market
Monetary Policy
Since November 2008, reserve money has replaced theexchange rate as the operating target of monetary policy.
Reserve money consists of currency in circulation andcommercial banks’ deposits held at the Central Bank.
Quarterly targets of reserve money are set so as to achievesustainable monetary growth. Reserve Money is managed via reserve requirements, lending facilities (standing
credit facility and emergency lending facility), and open
market operations.

The most frequently used money market instrument
is the deposit auction rate called the Deposit Auction
Arrangement (DAA). It is a market driven rate at which
commercial banks lend their excess liquidity to the Central Bank. The rate is set at multiple price auctions thatare held every week and tenors for this facility are 7, 14
and 28 days.

 Fixed Income Market
Government Securities

Government Stocks

Government of Seychelles Treasury bills are issued for
91 days, 182 days, and 1 year. Auctions are held every
Friday and all tenors are offered at each auction. Access toTreasury bills is open to all investors with registration on
the central depository and settlement done on T+3. The
minimum bidding amount is SCR 5,000, with multiples
of SCR 5,000 thereafter. Outstanding amounts at the end
February 2010 are provided in the table below.

Government stocks are long-term instruments issued by
the Seychelles Government for the financing of its capital
expenditure for a period of up to ten years. There havebeen no recent issuances. Outstanding amounts follow
in the table below.
Maturity

Outstanding
amount (SCR)

Proportion of total
stock outstanding

2014

70,000,000

70%

2017

30,000,000

30%

Treasury Bills
Tenor

Outstanding
amount (SCR)

Proportion of total
bills outstanding

91 day290,000,00018%

182 day

568,750,00035%

365 day

779,300,000

48%

Government bond auctions have been put on hold. Outstanding tenors are for 1, 2 and 6 years. Access to Treasury
bond auctions is typically open to all investors, foreign
and local, with accounts at the central depository, andsettlement is done on T+3 cycle. Outstanding amounts at
the end of February 2010 are provided in the table below.

Source: Central Bank of Seychelles

The graph below illustrates the Government securities
yield curve.
Government securities yield curve as at February
28, 2010
Yield
10%

8%

6%

Treasury Bonds
Maturity date

Interest
rate

Outstanding
amount (SCR)

Proportion of
total bonds
outstanding

December 10, 2010

7%

183,000,00022%

September 24, 2011

6%

86,800,000

11%November 22, 2011

8.25%

150,000,000

18%

October 02, 201210%

100,000,000

12%June 04, 2016

8%

293,550,000

36%

4%

2%

91 day182 day

365 day

2 years

6 years
Tenor

Source: Central Bank of Seychelles
Note: Rates for tenors longer than one year have been amended andfixed at the levels shown above.

Seychelles

135

Investors
The banking sector consists of seven commercial banks.
Two of the banks are owned by the state: Seychelles Savings Bank is fully state-owned, whereas Nouvobanq is 78%
owned by the state and 22% by Standard Chartered Bank.
Two commercial banks are branches of foreign banks(Habib Bank and Bank of Baroda) and others (Mauritius
Commercial Bank and Barclays Bank) are locally incorporated subsidiaries. BMI Offshore Bank is owned by
Nouvobanq and Bank Muscat International of Bahrain,each with 50% holdings. These seven banks held SCR
1.81 billion of the outstanding Government securities asat the end of 2009, approximately 83% of outstanding
Government securities.
There are two pension funds in Seychelles, the Social
Security Fund and the Seychelles Pension Fund. The
pension fund sector held SCR 0.25 billion worth of securities as at the end of 2009, representing 11.3% of the total
outstanding amount.

There are four licensed domestic insurance companies,
namely Sacos Insurance Company Limited, H. Savy Insurance Company Limited, Sacos Life Assurance Company
Limited and La Prudence Mauricienne Assurance Limitée.
These together held SCR 128 million worth of Government
securities. The sector holds 5.9% of outstanding issues.
Retail investors access the market by submitting bids inthe primary market at the Central Bank. The minimum
bid amount is SCR 5,000.

Secondary Market
There is very limited secondary market trading. In July
2009, the Central Bank formalized its intermediary role
where bondholders willing to exit their positions before
maturity are matched with potential buyers.
In recent years, the level of activity was minimal, driven
by retail investors on the sell side and pension funds on
the buy side.

The Central Bank of Seychelles held SCR 1million as at
the end of 2009.

 Foreign Exchange Market
The Seychelles Rupee (SCR) is a free-floating currency. The
Central Bank will only intervene in the foreign exchange
market in the event of a deviation from the establishedmonetary policy objectives. Intervention will be the resultof constant appreciation or depreciation of the currency,
or deviation from the required currency composition of
the foreign exchange reserves.

The current and capital accounts have been liberalized
and there are no restrictions on investment repatriation.
Investment proceeds are freely convertible and transferable in and out of the Seychelles.
The graph below provides historical levels of the SCR
against the USD.
20The Seychelles Interbank Foreign Exchange Market iscomprised of the Central Bank of Seychelles and all duly
licensed banks, with the exception of those granted solely
an offshore banking license. Each participant must havea demand deposit account in SCR with the Central Bankand another account in any traded currency. These interbank foreign exchange participants quote on a specificallydesigned blog site.

15

10

5

Dec 2004

Dec 2005

Dec 2006

Dec 2007

SCR per Unit of USD (Year End)
Source: Bloomberg

Dec 2008

Dec 2009

136

Seychelles Derivatives Market
There is no derivatives market.

 Regulation and Taxation
Regulation

Taxation

Effective 1 January 2010, the capital markets are regulatedby the Seychelles International Business Authority (SIBA).
The Central Bank regulates the banking and insurance
sectors and the Ministry of Finance regulates the pension fund sector.

Government securities do attract income tax or withholding tax at 5% for residents and 15% for non-residents.
Introduction of income tax for corporate bonds is also
under consideration. There is no capital gains tax.

Clearing and Settlement
The Central Bank of Seychelles is the custodian of all
Government securities. All securities are dematerialized
and settle on a T+3 cycle.

Regulatory Contacts
Central Bank of Seychelles
P.O. Box 701
Victoria Mahe Seychelles
Tel: +248 282 000
Fax: +248 323 665
Website: http://www.cbs.sc/

Seychelles International Business
Authority (S.I.B.A)
P. O. Box: 991
Bois De Rose Avenue
Seychelles
Tel: (+248) 380801
Fax: (+248) 380888
E-mail: steve@siba.net
Website: www.siba.net

Sierra Leone
2009 at a glance
Population (mn)

5.7

Population growth (annual %)2.4

Official language

EnglishCurrency

GUINEA

Conakry

Leone (SLL)

GDP (Current US$ bn)

2.5

GDP growth (annual %)3.6

GDP per capita (Current US$)

433.9

Total Debt (US$ bn)

0.7

Total Debt/GDP (%)

30.1

CPI (annual %)12.7

Exports of Goods and services (% of GDP)

14.6

Gross Official Reserves (in US$ bn)

0.2

Gross Official Reserves (in months of imports)

5.3

SLL/ per 1 USD

MakeniFreetown

SIERRA LEONEBo

KenemaLIBERIAMonrovia

3,866.64

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» Sierra Leone’s financial system has experienced significant progress after hostilities ceased in 2001. The numberof banks, insurance companies and other financial institutions has grown considerably.
»» The fixed income market is still relatively shallow and dominated by central Government issuance.
»» As is the case with other African countries, the investor base is composed almost exclusively of commercial banks.
»» Bloomberg codes for market data: SLGB Corp.

138

Sierra Leone Monetary Policy and Money Market
Monetary Policy
The Central Bank, Bank of Sierra Leone, is responsible fordefining monetary policy. The main policy goal is keeping
inflation under control.

Since the financial system is still fairly underdeveloped,
there are a limited number of policy tools available. The
Central Bank primarily uses Treasury bill auctions to
implement policy.

 Fixed Income Market
Government Securities

Investors

The fixed income market is still at an early stage of development. The only active issuer is the Government whichissues Treasury bills on a regular basis through the Bankof Sierra Leone.

Commercial banks are the main buyers of Government
bills. To date, there are 14 commercial banks operatingin the market.

The offering of Treasury bills includes securities of 91,
182 and 364 days. Government bills are sold at weekly
auctions conducted by the Central Bank. There is also a
1-year long treasury bearer bond available. Ownership ofthese bonds is verified by the actual bearing of the bondcertificate, precluding the need to maintain a central
registry of securities.
In an effort to improve debt management, the Government has decided to lengthen the maturity profile ofdebt instruments by gradually introducing longer-term
instruments, i.e. 2-, 3and 5-years Treasury notes.

The Intermediaries

In addition to commercial banks, the National Social Security and Insurance Trust (pension institution), discounthouses and insurance companies also buy Treasury bills.
Retail Investors participate in the market via commercial
banks. At present, foreign investors are not allowed in
the market. Nonetheless, the Government is currently
reforming its capital markets’ regulation and it is expectedthat the market will open to foreign investors at somepoint in the near future.

Secondary Market
Secondary market trading takes place over-the-counter
through primary dealers and Repo/Reverse Repo operations conducted by the Central Bank.

Instruments are sold via primary dealers. To be an authorized dealer, institutions must have a depository accountat the Central Bank.

 Foreign Exchange Market
The Central Bank is in charge of managing the Leone (SLL)
exchange rate. Although the currency is free-floating anddetermined by market forces, the stability of the exchange
rate in the past and the high frequency of Central Bank
interventions result in a currency regime that is akin to a
managed float. In 2009, in the follow up to the financial
crisis, the Leone depreciated by more than 20%.
In compliance with the West African Monetary Zone
exchange rate mechanism, of which Sierra Leone is amember, the target for the official annual average midrate is a band of +/15% from the central rate of 2562.18
Leones to 1 US dollar.
Auctions are conducted every week and are open to various participants, such as commercial banks and importersof goods and services.
The graph below provides historical levels of the Leone
against the USD

Sierra Leone139

SLL per Unit of USD (Year End)
4,000

3,500

3,000

2,500

2,000

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg Regulation and Taxation
Regulation
The Bank of Sierra Leone is the regulatory authority incharge of banks, non-bank financial institutions andcapital markets.
The insurance market is regulated and supervised by theCommissioner of Insurance. The Commissioner is respon-sible for the Sierra Leone Insurance Commission, an agencyof the Ministry of Finance and Economic Development.

Taxation
There is a withholding tax of 15% applied to interest
earnings.

 Clearing and Settlement
The settlement of securities is processed manually througha book entry system and is completed on a same day basis.
Successful bidders must ensure that their current accounts
at the Bank of Sierra Leone are sufficiently funded on Regulatory Contacts
Bank of Sierra Leone
Siaka Stevens Street Freetown
Sierra leone
Tel: +232-22-226501
Fax:+232-22-224764
E-mail: info@bankofsierraleone-centralbank.org
Website: www.bankofsierraleone-centralbank.org

settlement day to meet the settlement obligations. These
accounts are debited with the aggregate settlement priceof all Treasury bills successfully bid for at the auction.

Somalia
2009 at a glance

AsmeraPopulation (mn)

9.1

Population growth (annual %)2.3

Official language

SomaliCurrency

ARABIAN PENINSULAERITREADJIBOUTI

GULF OF ADEN

Djibouti

Somali Shilling (SOS)SOS / 1 USD (Year End)

Berbera1,484.03

Source: AfDB, Bloomberg

Dire Dawa
Addis Ababa

Hargeysa
Harer
GarooweETHIOPIA

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P

SOMALIA

Source: AfDB, Bloomberg

Mogadishu
Marka

Summary

KENYA

INDIAN OCEAN
Kismaayo»» Following the downfall of the central Government in 1991,

regional and internal conflict and humanitarian crises haveplagued Somalia; public infrastructure was left in ruins, social
services and all state institutions that provided financial services collapsed, livelihoods were disrupted and a large numberof people were displaced.
»» There is no fixed income market in Somalia.

Mombasa

142

Somalia Monetary Policy and Money Market
In the absence of formal commercial banking activities,
all economic transactions, including very large investment
transactions are settled through cash payments.

Macroeconomic Environment
In the past 18 years, the Somali economy has showed
great resilience given the political instability in the country.
Real economic growth is estimated to have averaged 2.6%
for the last three years. The major contributing sectors

are agriculture (65%), industry (10%) and services (23%).
There is heavy dependence on external remittances for
consumption and investment.

Overview of Financial Sector
Prior to the civil war, Somalia’s formal financial sector
comprised the following institutions: the Central Bank ofSomalia, the Commercial and Savings Bank of Somalia,
the Somali Commercial Bank, the Cooperative Bank ofSomalia, the Somali Development Bank and the State
Insurance Company of Somalia.

The Central Bank’s role includes acting as fiscal agent to
the Treasury, supervising commercial banks and others
financial institutions, and the issuing of currency.
Remittance companies are the only financial services
providers in the country for the majority of households
and for the whole of the private sector.

Currently, the financial system is composed of the Central
Bank of Somalia, remittance companies, and microfinanceinstitutions.

Inflation and Exchange Rates
The Somalia shilling has appreciated against the USD
during the last 5 years from SOS 3100/ 1 USD to SOS
1500/ 1 USD at the end 2009.

SOS per Unit of USD (Year End)
3,500
3,000

Alongside the Somali shilling, the US dollar is widely accepted as a medium of large and high value transactions,even for local trade exchange.
Inflation rates over the past 18 years have been staggeringly high, due to the injection of foreign and local printed
currency (counterfeit) into the economy, higher fuel prices
and food insecurity.

2,500
2,000
1,500
1,000

Dec 2004

Dec 2005

Source: Bloomberg

The opposite graph illustrates the historical levels of the
SOS against the USD.

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Somalia

Regulatory Contacts
Central Bank of Somalia
Head Office: Corso Somalia 55,
P. O. Box 11 – Mogadishu, Somalia
Tel: +2521-240162
Fax: +2521-241152
E-mail: info@somalbanca.org
Website: www.somalbanca.org

143

South Africa
ZIMBABWE
MOZAMBIQUE

2009 at a glance

Windhoek

Population (mn)

50.1

Population growth (annual %)0.9

BOTSWANANAMIBIA

Gaborone
Johannesburg

Official language

11 including English
and Afrikaans

Currency

265.5

GDP growth (annual %)-2.2

GDP per capita (Current US$)5,297.3

Total Debt (US$ bn)

75.1

Total Debt/GDP (%)

28.3

CPI (annual %)7.2

Exports of Goods and services (% of GDP)

32.4

Gross Official Reserves (in US$ bn)

35.1

Gross Official Reserves (in months of imports)

5.3

ZAR / 1USD (Year end)

MaputoMbabaneSWAZILAND

MaseruRand (ZAR)

GDP (Current US$ bn)

Pretoria

LESOTHOATLANTIC
OCEAN

DurbanSOUTH AFRICA
INDIAN OCEAN

Kaapstad
Port Elizabeth

7.3980Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

A

BBB+

Moody’s

A3

A3

S&P

A+

BBB+

Source: Bloomberg

Summary»» The most developed fixed income market in Africa with annual listed bond turnover above 15 times.
»» Government securities yield curve extends out to 26 years with liquidity concentrated in two issues: the R157

(matures 2014/15/16) and the R186 (matures 2025/26/27).
»» Increase in the issuance of domestic Government bonds (15.5% year-on-year in 2009) and corporate debt to cover

the fiscal deficit and corporate capital investments.
»» The relaxation of Foreign Exchange Control regulation has recently gained speed with a move to prudential

regulations.
»» In 2008, 27% of secondary market trading recorded by the exchange was by non-residents, down from a peakof 36% in 2006.
»» A major challenge is capturing the offshore bond trades into the local market liquidity, pricing and trading system.
»» Johannesburg Stock Exchange Ltd took over the Bond Exchange of South Africa Ltd in 2009.
»» Retail savings bond programme has taken off successfully.
»» Bloomberg codes for market data: BTMMSA<go>146

South Africa Monetary Policy and Money Market
Monetary Policy
The South African Reserve Bank (SARB) conducts monetary policy within an inflation targeting framework. The
current target is for CPI inflation to be within a range of
3 to 6% conducted within a flexible inflation targeting
framework. The SARB adopted the Inflation Targeting
monetary policy framework in 2000. Monetary Policy
Committee (MPC) members meet every 2 months to review
interest rates. In the aftermath of the financial crisis, theMPC met monthly to enable faster adjustment of policy
if necessary. The SARB creates a liquidity requirement in
the money market which it then refinances at the Repo
rate determined by the MPC. The Central bank accepts
two categories of Repo collateral:
Category 1 Rand denominated T-bonds and T-bills, SARB
debentures, Land Bank bills and Government securities
STRIPs.

Category 2 – comprised of some bonds in the All Bonds
Index (top 20 listed bonds by market capitalization andliquidity). These include, amongst others, some of Developement Bank of South Africa (DBSA), ESKOM andTRANSNET Issues.
Other monetary policy instruments are Cash Reserve Requirements, Reserve Bank Debentures, long-term reverse
Repos, and foreign exchange swaps.

Money Market
The Johannesburg Interbank Agreed Rate (JIBAR) is themoney market rate that is used by the South African market, and is calculated by the JSE. Ten banks are polled daily
for their bid and offer rates on 3, 6 and 12 month rates.
The middle of the bid-offer range for each is taken andthe two lowest and two highest of the ten are discarded.
The remaining six are averaged to obtain the daily rate
for each tenor.

 Fixed Income Market
Government Securities
The National Treasury (NT) issues Treasury bills withtenors for 91, 182, 273 and 365 days. Auctions are usually
held weekly on Fridays, but T-bills may also be issued
by private placement or any other means chosen by the
NT. Minimum bids are for ZAR 1,000,000, with multiples
of ZAR 100,000 thereafter. Direct access is through the
Money Market Internet System (MMIS) to registered users.
Republic of South Africa (RSA) Government Bonds areissued primarily to support the fiscal budget. Tenors withthe largest outstanding sizes and liquidity are the R186
(approximately 14.5%), maturing annually in three equal
tranches from 2025 to 2027, and the R157 (approximately
12.5%) also maturing annually in three equal tranchesfrom 2014 to 2016. An issuance calendar is drawn up to
facilitate coordination for public sector borrowing withstate-sponsored and corporate issuers. This is exclusively
a wholesale market with more sophisticated investors
and systems, hence only primary dealers may take partin primary auctions of RSA Government bonds.

Government securities yield curve as at 30 June
2008, 2009 and 31 March 2010
15%

Yield

12%

9%

6%

91
day

182
day

1
2
3
4
5
6
10
15
30
year years years years years years years years years

March 31, 2010

June 30, 2009

June 30, 2008

Tenor

Source: JSE Ltd

The RSA retail savings bonds are better suited to the retailinvestors as a direct investment with a minimum investment amount of ZAR 1,000 up to a limit of ZAR 5,000,000.

Non-Government Securities
Municipal Bonds are issued by city councils for development projects with tenors typically longer than one year.
The City of Johannesburg Municipality is the most active

South Africa

147

issuer in this category, followed by the City of Cape Town
Metropolitan Municipality. Only if they qualify for the
all-bond-index (ALBI), which they do not at the moment,
can they be used as collateral when trading Repos with
the South African Reserve Bank. Municipal bond issues
are not guaranteed by the central Government. Secondary
market trading is very rare.

Investors

Parastatal and corporate issuers are very active in the primary market for both short-term and long-term debt, themost noteworthy being ESKOM, Transnet and SANRAL.
Other key issuers are the commercial banks, mortgage
houses, asset finance houses, as well as off-balance sheet
SIVs like securitizations and conduits.

The total assets of official pension and provident funds asat the second quarter of 2009 were ZAR 815 billion, while
the total assets of private self-administered pensions andprovident funds at the same date were ZAR 520 billion.

The Commercial paper (CP) primary market is very active and is tapped by corporate issuers and state-owned
companies. The definition of Commercial paper in South
Africa has less to do with its tenor, and CP in South Africa
can have a maturity longer than one year.

Intermediaries
A Primary Dealer System was adopted in 1998 and themembers provide on-demand continuous and effective
two-way prices in Government securities. Trades arelargely transacted over-the-counter (voice brokered) andare subject to counterparty risk. However, trades arereported and matched on exchange in what was previously a BESA offering. Trades settle on a T+3 basis eventhough same day settlement is possible.
There are eight primary dealers, among which are thelargest South African banks: ABSA Bank, Investec Bank,
Nedbank Ltd, Rand Merchant Bank (a division of FirstrandBank) and Standard Corporate and Investment Bank.
Overall, there are 53 members in the bond market segment, 12 of which are banks.
There are three inter-dealer brokers (IDBs), two of which
are foreign-owned. The IDBs fulfil a vital intermediary role
amongst the dealers and therefore contribute towards
liquidity. They also provide pre-trade price transparency
from their screens.The JSE’s Yield-X offers a central-orderbook system for trading in bonds, which was developed as
an alternative to the BESA offering. The Yield-X offering
comprises a risk management system with settlement
assurance via SAFCOM, which acts as a lender of lastresort. Trades are thus margined and payment of themargin occurs through the Clearing Member. To date,
this has not been the preferred trading method of themarket. However, the JSE’s Interest Rate Division, as partof its strategic review, will evaluate all existing systems
in order to offer the market the most desirable solution.

The banking sector is comprised of 5 locally controlledbanks, 7 foreign banks and 15 branches of foreign banks
registered in terms of the Banks Act. As of September
2009, banks held ZAR 34 billion in short-term Government stock and ZAR 72 billion in long-term Government
stock. They also held ZAR 84 billion in Treasury bills.

Total assets of long-term insurers were ZAR 1,341billion
as at the second quarter of 2009, while the assets of shortterm insurers were ZAR 85 billion.
Total assets at book value of unit trusts as at the end of
the third quarter of 2009 were ZAR 717 billion.
There are no restrictions on the participation of foreign
investors in the debt markets and the market has been
opened to foreign issuers under certain criteria. In October 2006, the Mauritius Commercial Bank made a debut
issue in RSA and raised ZAR 350 million on BESA (thefirst regional or international inward listed bond in South
Africa), which was facilitated by the further relaxationof exchange controls in 2006. A couple of foreign issues
have taken place since; notably, in 2008, the first supranational bond was listed in South Africa by the African
Development Bank.
Retail access to the fixed income market is mainly throughmutual funds managed by the numerous investment management firms. Individuals may also buy bonds throughbrokers provides they transact in sizeable amounts. Balanced portfolios that include other bonds and asset classes
are readily available as product offerings to retail andinstitutional investors.
Holdings by category of investor as at June 30,
2009 (in percent)Central Bank, 1.50%

Non bank
private sector
and Foreign
investors,
47.20%

Public pension
funds, 34.60%

Commercial
Banks,
16.70%

Source: SARB148

South Africa

Primary Market
The National Treasury issues vanilla bonds on a weekly
basis (every Tuesday) and CPI-linked bonds (every Friday)
via auctions open to primary dealers. The Government
advises ahead of time which bonds and how much ofthese bonds will be offered to PDs via newswires, e.g.
Reuters and Bloomberg.
By mid-2009, the nominal value of all listed bonds measured ZAR 855 billion and there were 1065 issues by 104
different issuers. Notwithstanding the dominance ofGovernment debt, which comprised 53% of listed debt,
there is a growing share of corporate debt.
Corporate debt, including securitizations, accounts for justover 30% of total issuance. Banks are the foremost issuersin the private sector. The share of issuance by state-owned
enterprises, currently 12%, is set to increase over the next
few years as these roll out aggressive investment plans.
Corporate issuance, on the other hand, has suffered amoderate setback following the global financial crisis.
Municipal debt issuance is still very low, accounting forless than 1% of total bonds listed.
Listed debt by category of issuers as at end June2009 (in percent)Corporates,
19%

A turnover of 2009 was ZAR 13.4 trillion, which followeda record turnover of ZAR 19.2 trillion recorded on BESA
in 2008, and ZAR 13.8 trillion in 2007.
Nearly two-thirds of trades that occur in the local market
are Repo trades. Non-members of the local exchange areable to trade RSA bonds offshore OTC. Figures showthat such trades have grown considerably over the past
few years, although they have moderated substantiallyfollowing the global financial crisis. In 2008, non-resident
transactions accounted for 27% of the turnover recordedby the exchange, down from a peak of 36% in 2006.
Average turnover velocity (turnover-to-listings ratio)
dropped off sharply during the first half of 2009, from
24.3 to 16.5.
Pre-trade, the JSE updates a screen on Reuters, I-Net
Bridge and Bloomberg which shows the market the pricing on offer from market participants. The screen is called
BESA bonds and only provides the pricing information
for Government and parastatal bonds. Post-trade, theJSE disseminates end-of-day reports containing pricing
information. For instance, the JSE disseminates markto-market information on most instruments listed andtraded on the exchange and also trade-by-trade reportsthat show all the trades that have taken place during the
day and the relevant yield to maturity, without disclosing
the identities of the trading parties.
Trend in Secondary Market Trading
ZAR Trillions

Securitization,
12%

CentralGovernment,
54%

SOE,
12%

Water authorities, 2%

20

15

10

Municipal, 1%

5

Source: JSE Ltd
0

Price discovery and liquidity is greatly facilitated by theinterdealer brokers.

Secondary Market
The secondary market is a wholesale market dominatedby banks and fund management firms. It is liquid, although that liquidity is largely concentrated in a few
Government issues, such as the R157 (2014/15/16) and
the R186 (2025/26/27). Approximately 85% of turnover isaccounted for by trades in Government paper. Corporate
bonds do not trade much, with most investors in these
instruments adopting a buy-and-hold strategy.

2003

2004

2005

2006

2007

2008

Source: JSE Ltd

While bonds are exchange traded, a significant amountof swap and options trade takes place in the Over-theCounter (OTC) market.

Fixed Income Market Indices
BEASSA total return indices – comprising the all bondindex (ALBI), the Government bond index (GOVI) andthe other bond index (OTHI). The ALBI is made up of the
top 20 listed bonds, ranked by market capitalization andliquidity. The GOVI comprises those RSA bonds of theSouth Africa

ALBI in which the primary dealers are obliged to make amarket. The OTHI comprises the remainder of the bondsin the ALBI. All these indices measure the total return ofrepresentative bond portfolios, and provide benchmarks
for historical performance.
BESA money market index – an index against whichmoney market portfolios can be benchmarked. The index
provides a benchmark for money market investors that
replicates market behavior.
Standard Bank credit indices – these comprise the credit
fixed, credit floating, and credit composite indices (aweighted average index of the previous two). These indices149

provide an independent measure of the performance ofa market sampling that encompasses most of the credit
sector. They can be used to compare the performance ofindividual credit instruments that are neither issued nor
guaranteed by central Government. As such, most of
the constituent instruments are issued by private sector
organizations.
South African hedge fund index (by Clade & BESA) –an index created to represent all the open hedge funds
in the South African market. It provides investors witha replicable benchmark showing returns from investingin a hedge fund index.

 Foreign Exchange Market
The South African Rand (ZAR) is a freely floating unitaryexchange rate since 1995. Restrictions on non-resident
capital flows were fully liberalized in 1995 and restrictions on residents are gradually being relaxed. Only fully
licensed authorized dealers are permitted to deal in foreignexchange in South Africa.

»» Non-residents are permitted to hold foreign cur-rency accounts.

Turnover in the Foreign Exchange
Market
The average daily net turnover in millions of US dollar
for the three years is as follows:

SARB is in charge of exchange control and delegates some
responsibility to authorized foreign exchange dealers.
SARB has a stated policy of not intervening in the Forex
market or using interest rates to influence the value of thecurrency, but may buy USD from time to time to shore
up reserves when conditions permit.
The main markets are spot, options, forwards and swaps
in USD/ZAR. The market is also available for EUR/ZAR
and GBP/ZAR.

Investor Exchange Control Regulations

Year

Average daily turnover (US$ Million)

2006

10,871

2007

12,555

2008

12,778To June 2009

13,210Source: SARB
Note: These figures include spot, forward and SWAP transactions
against the South African Rand.

ZAR per Unit of USD (Year End)»» A resident needs SARB prior approval to borrowfunds from a non-resident.

10»» Firms with more than 75% non-resident owned orcontrolled have local borrowing restrictions linked
to the company’s net worth and amount of nonresident ownership.
»» There are no restrictions on profit, interest, dividend
and branch profit repatriation. However, director’sfees, management fees and royalties require SARB
approval.
»» Dividends and interest payments for non-residents
are exempt from taxes.

864
Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

150

South Africa Derivatives Market
Interest rate swaps are available from 2 to 30 years. The
pricing for forwards and futures on bonds is as per the
existing Government bond tenors. Currency futures andoptions on futures are also available in the market andpricing is available in near, middle and far tenors for these.
Forward rate agreement – the market is liquid up to ZAR
500 million, with bid/offer spread of 10 bps. Tenors goout to 2 years and average daily volume is ZAR 6 billion.
The JSE provides the following interest rate derivative
products for trading on the exchange:»» J-FRAs – futures on FRAs (forward rate agreements)

quoted on the fixed rate of the underlying contracts;
all have a duration of 3 months.
»» Bond futures and forwards – these are offered on

all Government bonds listed: R157, R186, R201,
R203, R204, R206, R208, and R209.
»» J-NOTES – standardized exchange traded futures»» J-ALBI – futures and options on the total returnother bond index, in near, middle and far maturities.
»» J-ILBI – futures and options on the Barclays/BESA

Government inflation-linked bond index, in near,
middle and far maturities.
»» J-SWAPS (bond look alike swaps) – these are ex-change traded and settled swaps of a NACS 6-monthinterest rate on the fixed side against the 3-month
JIBAR.
FX forwards – the market is liquid with an average transaction size of USD 50 million. Spreads are 20 bps but
are volatile, with tenors of up to 10 years. Average dailyvolume is USD 1 billion.
FX options – the market is less liquid. Transaction sizes
average USD 25 million and tenors go out to 5 years.
Cross currency swap – the market is liquid up to USD
30 million and is available up to 10 years. Spreads average 15 bps.

contracts on notional underlying swaps, in near (2years), middle (5 years) and far (10 years) contracts.
»» J-GOVIS – futures and options on the total return

Government bond index, in near, middle and far
maturities.

 Regulation and Taxation
Regulation
The Financial Services Board (FSB) is responsible foroverseeing the regulation of the financial markets, suchas the JSE and all financial institutions (insurers, brokers,etc). This, however, excludes banking institutions, whichfall directly under the responsibility of the South African
Reserve Bank.

Taxation
There is no withholding tax on bonds, but interest earnedon bonds is taxable as part of interest income to theinvestor.

South Africa has entered into double taxation agreementswith most of its trading partners, including Austria, Belgium, Canada, Cyprus, Denmark, France, Germany, India,
Ireland, Israel, Italy, Japan, Korea, Malta, Mauritius, theNetherlands, Norway, Singapore, Sweden, Switzerland,
Taiwan, Thailand, the United Kingdom and the UnitedStates.
Stamp duty at 0.25% is payable on certain agreements,
such as leases and mortgage bonds.

South Africa

151 Clearing and Settlement
Strate is the authorized Central Securities Depository forthe electronic settlement of all financial instruments in
RSA. Strate is the custodian for debt instruments, of which
virtually 100% are dematerialized (they are recorded in anelectronic securities register format).
The settlement procedures depend on the instruments
being listed, i.e. short versus long-dated issues. Bond
trades are settled on a T+3 rolling settlement. Settlement
is guaranteed by settlement banks on settlement commitment. The country’s settlement model is compliant with
the G30 recommendations on clearing and settlement.
On-exchange trades, which are trades reported by members and clients to the JSE via its BTB system, settle on a

net basis. All these trades are regulated by the JSE and they
have to be reported to the JSE system within 30 minutesof the trade being concluded. BESA, as the bond market
was known previously, adopted the G30 standard of trade
netting for the settlement of most types of transactionsin 1990. It was implemented in 1995 and dramaticallyreduces settlement risk while also simplifying the process.
Off-exchange trades (OTS off-shore trade settlement) occur
OTC and are concluded between off-shore clients. They
are then reported via Strate participants into the Strate
Bonds System for settlement and OTS bond settlements
are thus regulated by Strate. This OTC market settles ona gross trade-by-trade basis.

 Regulatory Contacts
Johannesburg Stock Exchange

The Financial Services Board,

One Exchange Square, Gwen Lane, Sandown, 2196 Private
Bag X991174, Sandton, 2146, Republic of South Africa
Tel: +27-11-520 7000
Website: www.jse.co.za

Rigel Park, 446 Rigel Avenue South, Erasmusrand,
Pretoria, RSA
Tel: +27-12-4288000
Fax: +27-12-4280221
E-mail: info@fsb.co.za

South African Reserve Bank
370 Church Street, Pretoria 0002, P.O. Box 427, Pretoria,
0001, RSA Tel: +27-12-313-3911
Fax: +27-12-3133197 or 27-12-3133929
Website: www.reservebank.co.za

Sudan2009 at a glance

EGYPT

Population (mn)

42.3

Population growth (annual %)2.2

Official language

LIBYA
B-ur S-ud-an

RED SEA

ArabicCHAD

Currency

Sudanese Dinar(SDD)

Umm Durm-an Al-Khart-um Bahrï
Khartoum

ERITREA
AsmeraWad Madani

GDP (Current US$ bn)

50.9

GDP growth (annual %)3.8

GDP per capita (Current US$)

1,196.6

Total Debt (US$ bn)

36.7

Abéché

SUDAN

Al-Ubayyiø

Addis Abeba
ETHIOPIA

Total Debt/GDP (%)

72.6

CPI (annual %)10.2

Exports of Goods and services (% of GDP)

16.5

Gross Official Reserves (in US$ bn)

0.7

Gross Official Reserves (in months of imports)

0.8

SDD / 1USD (Year end)

CENTRAL AFRICAN REP.
Bangassou
DEMOCRATIC REP. OF CONGO

235.26

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» Financial contracts must comply with Islamic law or Sharia.
»» The Government securities yield curve extends to 6 years with issuance points at 2, 3, 5 and 6 years.
»» Securities are issued at the beginning of each quarter, and as required by the Ministry of Finance.
»» Instruments are issued for liquidity management, fiscal policy, and the development of capital

markets.
»» Sukuk clearing and settlement is on a T+8 cycle.
»» All trading of securities is conducted via the Sudan Financial Services Company (Ltd).

UGANDA

KENYA

154

Sudan

 Monetary Policy and Money Market
Monetary Policy
The Central Bank of Sudan’s (CBOS) policy aim is tomaintain monetary and financial stability by achieving a
one-digit inflation rate and by targeting a balanced growth
in money supply.
The CBOS uses reserve requirement and open market
operations as policy instruments. The CBOS also has aninvestment window through which Islamic banks canaccess bridge financing in cases of seasonal financing gaps
or for the implementation of CBOS announced policies.
The Murabaha financing margin is set at approximately
9% for 2010 as an indicator per annum for the financing
transactions in local and foreign currency. However, thisrate does not apply to Murabaha operations in microfinance. The Central Bank of Sudan issues a circular on
how to calculate the Murabaha profits.

 Fixed Income Market
Government Securities
The Government of Sudan introduced the economic Islamic system in 1983 which prohibited the ‘riba’ (interest
or usury). This has influenced the way business transactions and investments are made. Financial contracts mustcomply with Islamic law or Sharia.

Instruments

by the Ministry of Finance and National Economy (MFNE)
on behalf of the Government of Sudan. The marketing iscarried out by Sudan Financial Services Company (Ltd) andthe authorized agency companies. Access to GMCs is open
to banks, local investors, foreign investors, companies,
individuals and financial institutions, and settlement isdone on T+1.

Government Musharaka Certificates (GMCs) are similar
to conventional Treasury bills and consist of securities
based on Islamic Sharia Fundamentals. They are issued

Issuance of GMCs for the last three years
Year

Number of
auctions

Maturity periodin years

Duration of profit
distribution inmonthsTotal number ofcertificates issued

Total amount in
SDG millions

Average annual
rate of return

2007

4

1

12

8,446,201

4,223.1

15.9%

2008

4

1

12

11,022,653

5,511.33

15.8%

2009

4

1

12

14,765,179

7,432

15.8%

Source: Bank of Sudan

The auction day and frequency of auctions for GMCs is as follows:Day of first version

Beginning of the subscription

End of the subscription

First of JanuaryFirst of February

After 10 days from beginningFirst of April

First of May

After 10 days from beginningFirst of July

First of August

After 10 days from beginningFirst of OctoberFirst of November

After 10 days from beginning

Source: Bank of Sudan

Government Investment Certificates (GICs) are similar toconventional Government bonds and are based on Islamic
Sharia issued by MFNE on behalf of the Government of
Sudan. Like the GMCs, they are managed and marketedin the primary market through Sudan Financial Services

Co (Ltd). GICs auctions are held as and when required by
the Ministry of Finance and National Economy. Accessto GICs is open to banks, local and foreign investors,
companies, individuals and financial institutions, andtenors are 2, 3, 5, and 6 years.

Sudan155

Issuance of GICs for the last three years
Year

Number of
auctions

Maturity period inyears

Duration of profit
distribution inmonthsTotal number ofcertificates issued

Total amount in
SDG millions

Average annual
rate of return

2007

5

2-6

6

4,250,102

425

16%

2008

3

3

6

1,969,143

197

16%

2009

1

3

6

3,000,000

300

16%

Source: Bank of Sudan

Non-Government Securities

Objectives of Government Securities
issuance in Sudan:»» managing liquidity at the macro economic level

through open market operations within the ambitof Islamic Sharia;»» financing part of the deficit in the general Government budget which is usually covered by borrowing
from the Central Bank;»» development of a savings and investment culturethat is Sharia compliant;»» introducing Islamic financial paper to help develop
the capital markets in Sudan and in the region.
Central Bank Igarah Certificates (CICs) are additional
Islamic certificates based on Islamic Sharia issued by
the Central Bank of Sudan and managed in the primarymarket by the Sudan Financial Services Co (Ltd). The firstissues were to finance the construction of the Central
Bank and its branches. Subsequent auctions are held as
and when required for liquidity management. Access to
CICs is restricted to commercial banks only.
Central Bank of Sudan Igarah certificates (CICs)
Year

Total
certificatesheld withebos andbanks

Certificates
soldCertificatespurchased

Net balanceofcertificateswith banks

2007

243,871867,000

682,600

184,400

2008

243,871

521,365

314,740

206,6252009

243,871

25,137

5,000

20,137

The following instruments have been issued in the corporate bond market:»» Bank of Khartoum Igarah Certificates;»» Financial Investment Bank Certificates based on

Mudaraba and Musharaka Sukuk;»» Global International Company Musharaka Sukuk.

Intermediaries
The Sudan Financial Services Company (Ltd.) represents
the primary market for Sukuk. The Sukuk must trade on
the stock exchange and there are 40 brokerage firms for
the Sukuk in the market.

Primary Market
There is no minimum competitive bidding amount. Whendemand exceeds the available supply for securities, theSudan Financial Services Company will make restrictions
to the amounts offered to individuals and banks.

Secondary Market
Trading in the secondary market takes place over-thecounter and is dominated by transactions in GMCs.

Source: Bank of Sudan Foreign Exchange Market
The foreign exchange policy is a managed flexible exchange rate regime. The CBOS is considering broadening
the number of currencies with which to align the SDD.
As part of this consideration, the CBOS is gradually implementing a plan of switching from using the US dollar

as a main currency for external transactions to a basket
that is anchored to the Euro.

156

Sudan

The opposite graph illustrates the historical levels of the
SDD against the USD.

SDD per Unit of USD (Year End)
300

250

200

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bank of Sudan Regulation and Taxation
Regulation
The financial sector is regulated by the Central Bank of
Sudan.

securities. There are no exemptions available to specificinvestors and no difference in tax treatment between
resident and non-resident investors.

TaxationInterest income is subject to income tax at 15% for corporate securities. There are no income taxes for Government Clearing and Settlement

The Sudan Financial Services Company (Ltd.) carries out
the clearing and settlement functions of Government
Sukuk trading. All Sukuk are held in electronic form andthe settlement cycle from trading and settlement andtransfer of securities is T+8.

 Regulatory Contacts
Bank of Sudan

Khartoum Stock Exchange

Gamaa Avenue, P. O. Box 313, Khartoum, Sudan
Tel: + 249-18-7056000
Fax: +249-18-3787223
E-mail: mainbranch@bankofsudan.org
Website: www.bankofsudan.org

P.O. Box 10835,
Khartoum, Sudan
Albaraka Tower,
5th Floor, Khartoum, Sudan
Tel: +49-18-782450/782390
Fax: +249-18-782225
Website: www.khartoumstock.com

Swaziland
2009 at a glance
Population (mn)

1.2

Population growth (annual %)1.5

Official language

Siswati/English

Currency

Lilangeni (SZL)

Barbeton
MOZAMBIQUE

SOUTH
AFRICA

Mbabane

2.8

GDP growth (annual %)0.4

GDP per capita (Current US$)

2,401

Total Debt (US$ bn)

0.5

Total Debt/GDP (%)

17.8

CPI (annual %)8.8

Exports of Goods and services (% of GDP)

82.4

Gross Official Reserves (in US$ bn)

0.8

Gross Official Reserves (in months of imports)

4.9

SZL/ per 1 USD

7.3980Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» Government securities issues are shorter term 91-day Treasury bills.
»» The fixed income market is relatively shallow.
»» The investor base for new bond issues is primarily composed of banks.
»» Reuters code for market data: SWAZ.

Manzini

SitekiSWAZILAND
Piet Retief
Nhlangano
SOUTH
AFRICA

SOUTH AFRICA

GDP (Current US$ bn)

158

Swaziland Monetary Policy and Money Market
Monetary Policy
Swaziland is a member of the CMA, a monetary union
which has the South African Rand as the common currency. Although the Central Bank of Swaziland retains
responsibility for monetary policy, its discount rate isclosely aligned to South Africa’s rate. South Africa, therefore, effectively formulates the monetary policy within
the CMA region.

The Central Bank’s discount rate is the main operationalvariable and the Bank of Swaziland uses open market
operations as a monetary tool. The instruments applied
include 91-day Treasury Bills, as well as 28 and 56-day
Central Bank bills.

 Fixed Income Market
Government Securities

Non-Government Securities

The Central Bank, on behalf of the Government of Swaziland, issues 91-day Treasury bills on a weekly basis .
From April 2008 to March 2009, there were 52 auctions
for a total notional amount of SZL 1.56 billion.1 The
vast majority of Treasury bills sold were purchased andheld by commercial banks. No bills were traded in thesecondary market.

The number of companies using bond issuance as a financing tool is still limited. They include Standard Bank (STD),
Newera Partners (NWR) and Inyatsi Construction (ICL).

The Government bills’ auction takes place every Wednesday, with results published the following day on the Central Bank’s website or on the Reuters page SWAZ. Treasury
bills are offered on competitive and non-competitive bids,
for a minimum investment size of SZL 5,000 and SZL
10,000 respectively. Participation in the auction is open toall, including individuals and non-residents. Bids can beplaced via primary dealers appointed by the authorities.
There are two Government bonds (SG004 and SG007) currently outstanding that will mature in 2010 (as illustrated
in the table below). These bonds were issued in 2004 and2007. Since 2007, the Government has not undertaken
any further debt financing via a bond issue.
Maturity profile of Government of Swaziland
securities as at June 30, 2009 (in Emalangeni)
400

Millions

350
300
250
200
150
100
50
0

0-1 year

1-3 years

Maturity

Source: Central Bank of Swaziland
1

Source: Central Bank of Swaziland Annual Report 2008-2009

In 2008, the Swaziland Stock Exchange (SSX) approved
the listing of a medium-term note (MTN) program for
Inyatsi Construction. The program size is SZL 70 million. To date, five note tranches have been issued (ICL01,
ICL02 ICL03, ICL04 and ICL05) for approximately 67% of
the full notional amount. Prior to that, a private equity
company had undertaken an SZL 200 million MTN, whichmatured in early 2009. Subsequently, the SSX approved a
new MTN program of the same value in April 2009. One
tranche of approximately SZL 41 million has already been
listed under the new program.
In December 2009, the SSX approved a Note Issuance
Program (NIP) of SZL 80 million by a commercial bank,Standard Bank Swaziland Limited (STDSZ01). So far, SZL
30 million has been raised through private placements.

Swaziland

159

The table below sets out debt instruments issued in the
country.
Issued Debt Instruments
Instrument

Coupon(%)

Redemption
Date

NominalValue (E)

Investors
The Investor base is composed primarily of banks, as illustrated in the chart below. The main operators are thestate-owned Swaziland Development & Savings Bank andthree South African banks: First National Bank, Nedbank
and Standard Bank.

Government Bonds
SG004

13.98

31-Aug-10

25,000,000

SG007

14

31-Aug-10

25,000,000

STD001

9.73

STD002
NWR02
NWR05

13.85

28-Feb-09

5,000,000

NWR07

14.6

15-Mar-09

65,000,000

NWR06

14.5

15-Oct-10

20,000,000

NWR09

14.5

31-May-09

5,167,527

NWR10

15.5

27-Jun-11

24,806,395

NWR11

14

18-Dec-09

34,334,000

NWR12

15

23-Dec-10

20,000,000

NWR13

14.5

13-Jan-10

156,000

Corporate Bonds
15-Sep-15

35,000,000

9.73

15-Sep-15

15,000,000

11.5

15-Mar-10

10,000,000

NWR14

15.5

13-Jan-12

17,625,000

ICL01

13.85

15-Sep-09

10,388,000

ICL02

12.5

15-Sep-09

5,055,000

ICL03

13.75

15-Mar-15

16,000,000

ICL04

9

19-Oct-12

5,000,000

ICL05

9

1-Dec-12

10,350,000

STDSZ01

8.7

14-Dec-19

30,000,000

Source: Central Bank of Swaziland Annual Report 2008-09

There also non-bank financial institutions such as insurance companies and pension funds investing in the fixedincome market. The Swaziland Royal Insurance Corporation (41% Government-owned) has practically a monopoly
over the insurance sector. Recently, two South African
insurance companies, the Old Mutual and Metropolitan,
have started tapping into the market.
The Swaziland National Provident Fund and the PublicService Pension Fund dominate the pension fund sector.
A few small private pension and provident funds also
operate in the market.
Individual investors can participate in the market via
primary dealers (in the case of Treasury bills) or througha broker. Non-residents are eligible to purchase Treasury
bills and other Government securities, however, theirinvestments are subject to exchange controls, as is thecase in South Africa.
Holdings by category of investor as at June 30,
2009 (in percent)
Other 3%
Private Individuals 5%

Insurance companies 1%

Intermediaries
The primary dealers for Treasury bills are Standard Bankof Swaziland, Nedbank (Swaziland Limited) and Swaziland
Development and Savings Bank (Swazi bank).
Commercial
Banks 91%

Government and Corporate bonds are transacted in thestock exchange (SSX).
The SSX authorizes brokers to be market makers. Such
brokers receive mandates from clients and are not allowed
to deal for their own accounts.

Source: Central Bank of Swaziland Foreign Exchange Market
The South African Rand (ZAR) is the legal tender in all
countries of the Common Monetary Area. Nonetheless,each country still retains the right to print its own currency, which may be used as legal tender inside its borders.
Under the CMA agreement, the local currency Emalangeni(SZL) is pegged at par to the South African Rand.

All CMA member countries apply the same exchange
control regulations: non-resident capital flows are generally unrestricted; capital, profits and dividends can berepatriated; and exchange control limitations apply toresident capital flows.

160

Swaziland

The opposite graph provides historical levels of the SZLagainst the USD.

SZL per Unit of USD (Year End)
10

8

6

4

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg Regulation and Taxation
Regulation
The Central Bank of Swaziland has regulatory oversight ofthe banking sector, with the Capital Market Development
Unit designated with specific monitoring authority of thecapital markets. These consist of a small bond market andthe Swaziland Stock Exchange

Committee which is constituted of market participants,in the absence of the requisite legislation.

Taxation
There is no capital gains tax in the country. There is a
10% tax on interest payments to both resident and nonresident holders of fixed income instruments.

The Bond market is governed by the CMA member rules
and SSX Listings Requirements sanctioned by the SSX Clearing and Settlement
Settlement for bids (in relation to Treasury bills and CBS
bills) is T+2.

There is no central depository. Transactions are settled
through transfer secretaries who are members of thestock exchange.

Settlement of Government and corporate bonds is on a
T+5 cycle.

 Regulatory Contacts
Central Bank of Swaziland
P.O. Box 546
Mbabane, Swaziland. Tel: +268-408-2000
Fax: +268-404-0038
E-mail: info@centralbank.org.sz
Website: www.centralbank.org.sz

Swaziland Stock Exchange
Mr. Sipho A. Dlamini
P.O. Box 546
Mbabane, Swaziland
Tel: +268-408-2500/2164
Fax: +268-404-9493
E-mail: siphod@centralbank.org.sz
Website: www.ssx.org.sz

2009 at a glance

S O M A LIE

Tanzania
S O M A LIA

KampalaUGANDA

Population (mn)

43.8

Population growth (annual %)Nairobi
KigaliRWANDA

2.9

KENYA

Kiswahili/English

Currency

Tanzanian Shilling(TZS)

GDP (Current US$ bn)

19.6

GDP growth (annual %)5.1

GDP per capita (Current US$)

449.0

Total Debt (US$ bn)

7.0

Total Debt/GDP (%)

35.7

CPI (annual %)9.4

Exports of Goods and services (% of GDP)

20.9

Gross Official Reserves (in US$ bn)

2.9

Gross Official Reserves (in months of imports)

4.6

BURUNDI
Bujumbura

Mombasa

TANZANIA
Tanga

TaboraDodomaLake Tanganyika

Zanzibar

Indian Ocean

Official language

DEMOCRATIC REP. OF CONGO

MwanzaDar Es Salaam

Mbeya
ZAMBIA

Lake Nyasa

MtwaraMzuzu
MOZAMBIQUETZS/ per 1 USD

MALAWI

1,339.50

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» Government securities yield curve has tenors up to 10 years.
»» No declared official benchmark for any bill or bond, but all tenors up to 5 years are liquid and the 364-day Treas-

ury bill is the most traded on the secondary market. Available maturities are: 35-, 91-, 182-and 364-days, and2-, 5-, 7and 10-years.
»» Auctions of Treasury bills and bonds are announced one week before issuance in local papers and on the Bankof Tanzania (BOT) website. There is no official auction calendar with tenors and amounts. Treasury bill auctions
are held fortnightly, whilst Treasury bond auctions take place once a month.
»» Foreign investors are restricted from investing in the local bond market.

162

Tanzania Monetary Policy and Money Market
Monetary Policy
The Bank of Tanzania (BOT) conducts monetary policyby targeting monetary aggregates, with the aim of achieving price stability. The policy instruments used are open
market operations, refinancing policy, cash reserve requirements and foreign exchange intervention. Open
market operations are the priority monetary policy tool
used by the BOT.

to the Finance Minister and to Parliament. Monetary
policy on a day-to-day basis is managed by the Liquidity
Management Committee while the Monetary Policy Committee deals with the more long-term monthly perspective.

Money Market
The money market comprises Treasury bills, repos, theinterbank cash market and the interbank foreign exchange
market.

The Central Bank holds consultations with the Government on policy and reports twice a year on developments Fixed Income Market
Government Securities
Treasury bills are issued by the Bank of Tanzania on behalfof the Government of Tanzania for deficit financing andliquidity management. Tenors issued are 35-, 91-, 182-,and 364-day bills. Auctions are held every two weeks
and all tenors are offered at each auction. Typical issue
sizes range from TZS 65 to 130 billion. Minimum bid size
is TZS 500,000 when bidding through primary dealers
and TZS 5,000,000 for direct bidders with multiples of
TZS 10,000. Settlement takes place on a T+1 basis. The
outstanding stock of Treasury bills as of 30 September
2009 was TZS 299 billion.
Tanzania Government Bonds are currently issued primarily
as fiscal policy instruments, but also serve to lengthen thematurity profile of Government debt and the yield curve(that is illustrated in the graph below), and increase thenumber of tradable instruments in the market. Tenors
issued are 2-, 5-, 7and 10-years. Auctions are held once amonth under a multiple price system and are announced
a week before the auction day. Issue sizes range from TZS
20 to 50 billion. The minimum bid size is TZS 1,000,000
when bidding through primary dealers and TZS 5,000,000
for direct bidders with multiples of TZS 100,000. Treasury bonds are offered to Tanzanian residents only. The
outstanding stock of Treasury bonds as of 30 September
2009 was TZS 1.85 trillion.

Government securities yield curve as at 30 June
2007, 2008 and 2009
Yield
20%

15%

10%

5%

0%

35
days

91
days

182
days

30-Jun-09

364
days

30-Jun-08

2
years

5
years
30-Jun-07

7
years

10
years
Tenor

Source: Bank of Tanzania

Maturity profile for Government securities as at
end Feb 2010
1500

Billions of TZS

1200
900
600
300
0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Year
T-bonds
T-bills

Source: Data from Bank of Tanzania

Tanzania

163

Non-Government Securities
Parastatal and corporate issuers are not very active andhave had seven issues since 2003. Six of the issuers havebeen financial institutions, namely the East African Development Bank (bond worth TZS 15 billion), PTA Bank(TZS 15 billion), Barclays Bank Tanzania Ltd (TZS 10
billion), Standard Chartered Bank Tanzania Ltd (TZS 8
billion), BIDCO Oil, and Soap Co. Ltd. The maturities so
far have extended to seven years.

Intermediaries
Commercial banks are registered as primary dealers. They
have no obligation to provide two-way quotes and also
do not have exclusive access to auctions in the primarymarket. There are some brokers within the East African
region that seek levels on Treasury bills and bonds on the
Money Market. It is not known with certainty whether
any transactions occur through their intermediation.
Bank dealers often call each other directly for Treasury
bills and bonds.

Investors
The chart below illustrates the holdings of Government
securities.
Holdings by category of investor as at June 30,
2009 (in percent)Non-bank Financial Institutions, 2.00%
Other official entities, 1.00%
Individuals, 0.60%

Commercial Banks,
30.30%

Insurance companies, 1.70%

Central Bank,
41.40%

Pension funds,
22.90%The banking sector holdings account for 30.3%/TZS 733
billion of total domestic debt as of 30 September 2009.
The pension fund sector has six pension funds holding
22.9%/ TZS 554 billion of total domestic Government debt
as of 30 September 2009.
There were 18 insurance companies registered in Tanzania. According to the BOT quarterly bulletin, insurancecompanies held 1.7%/TZS 41 billion of total Government
debt stock as of 30 September 2009.
Foreign investors are not allowed to participate in bothTreasury bill and Treasury bond auctions, but this isscheduled to change by 31 December 2012 according toa signed East Africa Community agreement. Foreigners
can invest in corporate bonds traded on the Dar es Salaam
stock exchange.
Retail investors access the market mainly through collective investment schemes, of which there are threecurrently. Retail investors can also submit bids throughprimary dealers and maintain subaccounts under primary
dealers.

Secondary Market
In principle, Treasury bills can be traded over-the-counter,but Treasury bonds must be traded on the exchange.
However, the practice seems to be OTC trading for bonds
as well, which are then reported to brokers for registrationon the stock exchange.
The day-count convention is actual/365 and the daily
turnover is estimated at TZS 1.5 billion.
The 2-year bond is the most actively traded tenor.

Source: Bank of Tanzania Foreign Exchange Market
The Tanzania shilling (TZS) has a managed float unitaryexchange rate. Tanzania does not have a fully liberalized
capital account and therefore has restrictions to capital
flows. The interbank foreign exchange market is comprised of 30 banks, 18 of which transact through Reuters dealing with two-way quotes applicable up to USD
100,000. The main market is the spot market for TZS/USD; the forward market is fairly short-term, but is developing. There is also an available market for TZS/EUR
and TZS/GBP.

164

Tanzania

The opposite graph provides historical levels of the TZSagainst the USD.

TZS per Unit of USD (Year End)
1400

1200

1000

800

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg Derivatives Market
Several OTC transactions have taken place in the market.
Short-term forward currency transactions and interest
rate swaps can be structured by banks for their clients.

 Regulation and Taxation
Regulation
Capital markets are regulated by the Capital Markets andSecurities Authority (CMSA) created in 1996. The roleof the CMSA is to regulate the issues and issuers in thecapital market as well as develop the market. Whilst theissuance of Treasury bills and bonds is under the supervision of the Bank of Tanzania, guidelines for the issuanceof corporate bonds are set and enforced by the CapitalMarkets & Securities Authority (CMSA) in consultation
with the BOT.
BOT is responsible for the licensing, supervision andregulation of the banking system.
The Social Security Regulatory Authority (SSRA), theregulatory body for the pension industry, was officiallycreated in June 2009 and will become fully operational
after the recruitment of board members.
The insurance sector is regulated by the Tanzania Insurance Regulatory Authority (TIRA) created in 2009.

Taxation
Government securities attract withholding tax on interest income at a rate of 10%. Interest income earned frominvestment in 2-year Treasury bonds is subject to withholding tax, while income on investment in 5-, 7 and10-year bonds is exempt from withholding tax. Likewise,
corporate bonds with maturities extending to three years
and above are exempt from withholding tax on interest
income. All bonds listed on the DSE are exempt from
capital gains tax.

 Clearing and Settlement
The BOT introduced an electronic book entry system in
1999, with settlement of T+1 for Government securities
in the primary market. In 2004, the BOT also launched theReal Time Gross Settlement system that greatly improved
the efficiency with which transfer of large amounts offunds is accomplished. The market also operates on a
Delivery versus Payment and Payment versus Payment
basis. The Bank of Tanzania Electronic Clearing House
facilitates the exchange of both physical paper and electronically registered securities.

Tanzania

165 Regulatory Contacts
Bank of Tanzania

Dar-es-Salaam Stock Exchange

P.O. Box 2939, Dar-es-Salaam, Tanzania
10 Mirambo Street, Dar-es-Salaam, Tanzania
Tel: +255-22-2110945-7, 2110951-2
Fax: +255-22-2113325
E-mail: info@hq.bot-tz.org
Website: www.bot-tz.org

P.O. Box 70081, Dar-es-Salaam, Tanzania
Twiga Building, 4th Floor, Samora Avenue, Dar-es-Salaam,
Tanzania
Tel: +255-21-2135779, 2123983, 2128522
Fax: +255-21-2133849
E-mail: info@darstockexchange.com
Website: www.darstockexchange.com

Capital Market and Securities Authority
P.O. Box 75713, Dar-es-Salaam, Tanzania
Tel: +255-21-2113903, 2114959-61
Fax: +255-21-2113846
E-mail: capmarkets@cats-net.com

Tunisia
2009 at a glance
Population (mn)

10.3

Population growth (%)

1.0%

Official language

ArabicCurrency

ITALY

BizerteTunis
Stif

Qacentina
SousseMalta

Tunisian Dinar (TND)

GDP (Current US$ bn)

41.3

GDP growth (annual %)3.1

GDP per capita (US$)

4,024.2

External Debt (US$ bn)

20.9

External Debt/GDP (%)

50.6

CPI (%)

3.2

Exports of Goods and services (% of GDP)

52.6

Gross Official Reserves (in US$ Bn)

10.6

Gross Official Reserves (in months of imports)

6.0

Sfax

Gabès

MEDITERRANEANSEATUNISIA

Tripoli

ALGERIATND/ 1 USD (year end)

LIBYA

1.3237

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

A-

BBB

Moody’s

Baa2

Baa2

S&P

A-

BBB

Source: Bloomberg

Summary»» Government yield curve has tenors up to 15 years with five benchmark points along the curve.
»» Growing and diversified investor base with marginal presence of foreign investors.
»» Weekly and Monthly Auctions of Treasury bills and bonds respectively.
»» Average size of transactions on the secondary market was TND 0.38 million in 2008.
»» In 2007, the foreign investors’ participation in a single public or private debt issue was increased up to 20% of

the half-year projected outstanding amount.
»» Bloomberg and Reuters codes for market data:• Reuters: BCTX
• Bloomberg: TNWE

168

Tunisia Monetary Policy and Money Market
Monetary Policy
The Central Bank of Tunisia, Banque Centrale de Tunisie(BCT), formulates and implements monetary policy. The
BCT conducts open market and Repo operations, using
the monetary base as an operating target and inflation as
an intermediate operating target. In addition to monetary
aggregates and credit monitoring, monetary policy isbased on diversified indicators closely linked to inflation,
notably import prices and the output gap.
In the medium term, the Central Bank plans to switch to
an inflation-targeting policy.

The Monetary Policy Committee (MPC) meets weekly.
Unless there is an extraordinary event that requires earlyintervention, the BCT’s Board meets on a monthly basis.

Money Market
Repo, Certificate of Deposits, and Commercial Paper are
the main components of the Tunisian money market. All
money market instruments are dematerialized.
The money market benchmark rate is the “Taux Moyen
Mensuel du Marché monetaire” (TMM), which is reseton a monthly basis.

 Fixed Income Market
Government Securities
The fixed income market comprises short-term Treasury bills (Bons du Trésor à Court Terme BTCT), bonds
equivalent to Treasury bonds (Bons du Tresor Assimilables – BTA), and corporate obligations. These securities
are fully dematerialized and have tenors ranging from 13
weeks to 15 years for public securities and from 5 to 25
years for corporate obligations.
The Government of Tunisia, through its issuing agent
the Treasury, regularly issues debt1. Short-term Treasury
bills (BTCT) are issued through weekly (but on an irregular basis) auctions for 13-, 26 and 52-weeks tenors.
BTCT are issued through bids of TND 1,000 each andreimbursable at maturity. Interest is calculated and paid
at the issuance date.
Bonds equivalent to Treasury bonds (Bons du Trésor
Assimilables – BTA and BTZc) are issued on a monthly
basis for tenors between 2 and 15 years. Both are issued
through bids and are reimbursable at maturity.
The main characteristics of Government debt issuanceare summarized in the table below:

1 The Treasury ceased issuing transferable T-bills (which were
instruments of the money market), as well as negotiable T-bonds.

Auction details
T-bills

T-bonds

Auction frequency

Weekly, on Thursdays

Monthly, the first
TuesdayAuction method

Dutch

Dutch

Settlement cycle

T+7

T+7

AccessThrough 13 Primary Dealers

Minimum bid
amountForeign investorsn/a
Up to 20% of each half-year previsional
outstanding issue

As of 30 September 2009, the total outstanding debt is
TND 7.035 billion, of which 82% is Government obligations and the remaining corporate debt. More than 63%
of Government debt matures within five years, 32% between 5 and 10 years, and 5% above 10 years. Interest is
payable annually, with bullet repayment of the principal.
93% of outstanding Government securities are fixed rate
instruments and the remaining securities zero-coupon
obligations.
The following graph describes the change in the Tunisian Government yield curves over the last three years,
highlighting the impact of the financial crisis in 2009 on
the one hand, and the decrease in the BCT’s key policy
rate in early 2009 on the other hand, resulting in a dropof yields across all maturities in July 2009.

Tunisia

169

Government securities yield curve as at 30 June
2007, 2008 and 20098%

7%

Commercial banks and mutual funds are major investors,
accounting for more than 60% of holdings of Treasury
bills and bonds as of 31 July 2009. The participation offoreign investors and the BCT has been marginal over thelast two years, as seen in the chart below.
Holdings by category of investor as at June 30,
2009 (in percent)

6%

5%

4%

91-d

182-d

1-y

30-Jun-09

2-y

3-y

30-Jun-08

5-y

10-y

15-y

30-Jun-07

CB for their Clients,
37.66%

Mutual Funds,
28.73%

Source: Banque Centrale de Tunisie (BCT)

Non-Government Securities
Most major Tunisian corporations issue debt throughout
the year, depending on the liquidity available in the capital
markets. Municipalities are allowed to issue debt in thecapital markets, however, to date they have not issued
any debt. Financial institutions are the most active among
non-Government issuers.

Intermediaries
Local and foreign investors have access to the primaryand secondary debt market through primary dealers assigned by the Ministry of Finance. Primary dealers must
subscribe at least 4% of the annual Treasury bonds and
3% of the annual Treasury bills issuances.
The BCT participates in the secondary market throughopen market transactions and Repo operations that influence the interbank benchmark rate.

Investors
The Tunisian debt market is relatively active with a diversified investor base, namely commercial banks, mutual andpension funds, the BCT and foreign investors.

Commercial Banks,
32.99%

Central Bank (BCT), 0.43%
Foreign Investors, 0.19%

Source : Banque Centrale de Tunisie (BCT)

Primary Market
The Tunisian Government (via the Treasury), major corporations and financial institutions regularly issue debt
in the capital market in order to match their financing
requirements.

Secondary Market
The fixed income secondary market is illiquid, despite aslight increase in the trading volume in recent years: 64transactions executed in 2004, 508 transactions in 2008
and 240 transactions in the first six months of 2009.
On average, less than two transactions are traded daily
in the secondary market, for a turnaround of TND 0.380
million. Debt instruments are traded in the Bourse desValeurs Mobilières de Tunisie (BVMT) and prices are
published on the website of the BVMT.

Foreign Exchange Market
The Tunisian Dinar follows a managed floating exchange
rate regime and is officially convertible for all current account transactions. The TND is pegged to a basket of thecurrencies of Tunisia’s main trading partners. The Euro hasa preponderant share of the basket, as most of Tunisia’s
trading partners are Euro zone countries.
TND rates are freely set through interbank transactions
by commercial banks.

Subject to a valid Certificate of Capital Importation (CCI),
interest and capital gains realized by foreign investors canbe fully repatriated. However, the transfer of foreign currency by residents is capped, depending on the purposeof the transaction.
The Tunisian Dinar (TND) has depreciated against all
major currencies in the past five years.

170

Tunisia

The opposite graph provides historical levels of the TND
against the USD.

TND per Unit of USD (Year End)
1.5

1.2

0.9

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: BCT

Derivatives Market
The derivatives market comprises mainly foreign exchange
forwards, including cross currency forwards, and more
recently, forward rate agreements (FRAs) and interest
rate swaps and options. The derivatives market is not
yet organized in a central exchange and transactions are

executed over-the-counter (OTC). Banks can offer theirclients (which may include other banks) cross currency
forwards up to 12 months and vanilla foreign exchange
options up to 3 years.

Regulation and Taxation
Regulation
The Financial Market Council (Conseil du Marché Financier CMF) is responsible for regulating, monitoring andsupervising capital markets. The Council oversees andcontrols the stock market, primary dealers, mutual funds
and the clearing and settlement house.

companies. However, for individuals, interest incomesare deductible with a cap at TND 1,500.
Interest income and capital gains by non-residents aretaxable at 20%.

TaxationInterest income is taxed at 20%. Capital gains on bondsales are included in taxable income for individuals andClearing and Settlement
STICODEVAM, the “Sociéte Tunisienne Interprofessionnelle pour la Compensation et le Dépôt de Valeurs
Mobilières” is the clearing and settlement house, as
well as the central depository for securities. In addition
to the Central Bank and the Treasury, its shareholders include various market intervenants. Securities are
identified by an ISIN Code and are entirely dematerial-

ized and settled using the Delivery versus Payment(DVP) method.
Securities are settled on T+7, on a gross basis by type(stock, T-bonds and T-bills) at business closing date. The
day-count convention is maturity-based, which is Act/360
for maturities lower than one year and Act/365 above.

Tunisia

171

Regulatory Contacts
Banque Centrale de Tunisie

Conseil du Marché Financier

B.P 777-1080, Tunis, Tunisia
25, rue Hédi Nouira, Tunis, Tunisia
Tel: +216-71-254000/340588
Fax:+216-71-340615
E-mail: boc@bct.gov.tn

8,Rue du Mexique 1002, Tunis, Tunisia
Cité Montplaisir, Tour Babel Escalier E, 1073 Tunis, Tunisia
Tel: 216-71-844500
Fax: 216-71-848001/841809
E-mail : cmf@cmf.org.tn

Uganda2009 at a glance
SUDAN

Population (mn)

32.7

Population growth (annual %)3.3

Official language

UGANDA

EnglishCurrency

Uganda Shilling (UGX)

GDP (Current US$ bn)

15.6

GDP growth (annual %)6.5

GDP per capita (Current US$)

478.5

Total Debt (US$ bn)

2.4

Total Debt/GDP (%)

15.5

CPI (annual %)11.5

Exports of Goods and services (% of GDP)

15.

DEMO. REP. OF CONGO

Mbale

KENYA

Jinja
KampalaMasakaMbararaLake Victoria

Gross Official Reserves (in US$ bn)

2.4

Gross Official Reserves (in months of imports)

5.5

UGX/per 1 USD

RWANDA

KigaliMwanzaBURUNDI

1900.00

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Fitch

B

B

Moody’s

Not rated

Not rated

S&P

B+

B+

Source: Bloomberg

Summary»» Government securities yield curve has tenors up to to 10 years.
»» Liquidity is concentrated in the two- and three-year section of the curve.
»» The Central Bank aims to issue more long-term securities targeting a Treasury bills to bonds ratio of 40:60 from 48:52

in June 2009.
»» There is a bi-monthly issuance of Treasury bills of all maturities every 14 days and one Government bond auction isheld every 28 days.
»» Settlement for bonds in the primary market is T+1 and T+0 in the secondary market.
»» An increase of 19% in the secondary market trading in Government bonds from FY 2007/8 to 2008/9.
»» There is a need for a more diversified investor base.
»» The Financial Markets Development Plan (FMDP) was launched in September 2008 under the auspices of the Monetary
Affairs Committee (MAC) of the East African Community as a common financial markets development approach in
the region.

174

Uganda Monetary Policy and Money Market
Monetary Policy

Money Market

The Bank of Uganda (BOU) conducts monetary policy
within a monetary aggregate targeting framework. Consequently, there is no explicit short-term interest rate
target. The policy instruments are open market operations,discount window, cash reserve requirements and foreignexchange sales. Open market operations (OMO) are theprimary monetary policy tool used by the Central Bankand are executed exclusively with the primary dealersof Government securities. Government securities withmaturities of one year or less are used as collateral for
Repos OMO..

The most frequently used money market pricing reference
rate is the 182-day Treasury bill, typically priced from theprimary auctions. The market is developing an interbank
money market rate referred to as KIBOR (Kampala Interbank Offer Rate) that averages the overnight interbank
rates in the market. Efforts are being made to extend it
to a weekly and monthly reference.

Fixed Income Market
Government Securities
Government securities are issued by the Bank of Uganda
on behalf of the Government of Uganda as monetary
policy instruments. Treasury bills are 91-, 182-, and 365day bills. Auctions are held once every two weeks andall tenors are often offered at each auction. Access isthrough the primary dealer system, though bids may be
sealed by the investor and submitted through primary
dealers. Minimum bids are UGX 100,000,with multiplesof UGX 100, 000 thereafter. The outstanding stock as of
31 December 2008 was UGX 1.368 trillion.
Uganda Government Bonds are issued for 2, 3, 5 and 10
years. The 2 and 3-year tenors are the most issued andhave the highest liquidity. There is a pre-determined issuance schedule in place: Treasury bond auctions are held
once every 28 days, with only one tenor offered. All bids
in the primary market are submitted through primary
dealers, though investors can submit sealed bids throughprimary dealers. The graph below illustrates the trend in
the Government securities yield curve.

Government securities yield curve as at 30 June
2007, 2008 and 2009
Yields
20%

15%

10%

5%

91
days

182
days

30-Jun-09

364
days

2 years

30-Jun-08

3 years

5 years

30-Jun-07

10 years
Tenor

Source: Bank of Uganda

Non-Government Securities
Parastatal and corporate issuers are becoming increasingly active in the primary bond market. The majority ofcorporate issuers thus far have been financial institutions,issuing amortizing and bullet bonds with both fixed andfloating rate options. Outstanding issuances as at 28
February 2010 amount to UGX 143 billion, all from fivefinancial sector issuers.

Intermediaries
A Primary Dealer (PD) System was adopted in 2003 withthe appointment of five commercial banks. A sixth PD
was appointed in 2008. PDs participate in open market
operations (auctions, repurchase agreements, reverse
repurchase agreements, and outright sales and purchaseof Government securities) and secondary market transac-

Uganda175

tions. Reforms are ongoing to strengthen the PD system
by including non-bank PDs.

(these holdings are included in the commercial bank’s
holdings in the chart)

Government bonds are also listed on the Uganda Securities Exchange. However, almost all trading is done in theover-the-counter market amongst dealers.

Retail investors can invest directly through primary dealersand hold sub-accounts at the central depository, or invest
indirectly through the products of the growing numberof mutual funds in the market.

Investors
The bond market is dominated by commercial bankswith 69.3% and the national pension fund with 13.4% of
outstanding holdings, as illustrated in the chart below.
There is growing demand for bonds from fund managers
as assets under management continue to grow. It should
be noted that the holdings by commercial banks include
holdings by foreign investors.
Holdings by category of investors as at June 30,
2009 (in percent)Individuals 1%

Central Bank 5%

Pension Funds,
15%

Primary Market
Primary issues are done through a multiple price auction
system, with bids accepted on both a competitive andnon competitive basis. As of June 2009, total outstanding
Treasury bill and bond issues amounted to UGX 2,656
billion (USD 1.284 billion) from 85 issues, while for June
2008, the total outstanding Treasury bill and bond issues
amounted to UGX 3,003 billion (USD 1.85 billion) from
95 issues. There has been increased issuance by corporate
entities specifically from the banking sector in the recent
past, but the market remains predominantly a Government securities market.

Secondary Market
Insurance Companies,
2%

Commercial Banks,
77%

Source: Bank of Uganda

There are 22 commercial banks, 4 credit institutions and3 microfinance deposit-taking institutions. Three foreign
owned banks in Uganda account for approximately 75% of
Uganda’s banking sector assets, with Stanbic Bank Uganda,
a foreign bank from South Africa, being the largest.
The pension fund industry is still dominated by the
National Social Security Fund and holds a significant
proportion of Government bonds particularly at the longend of the yield curve.
The insurance industry is comprised of 21 firms. The
size of the industry by assets was UGX 1.91 billion by
the end of 2008.
There are 5 licensed fund management firms in Uganda
as of 31 December 2009.
Foreign investors are not restricted from participatingin the debt markets. Holdings by foreign investors ofGovernment securities at end June 2009 was UGX 100
billion, representing 3.77% of the total outstanding debt.

In the secondary market, all primary dealers provide
on-demand continuous and effective two-way prices foron-the-run Government instruments. Trades are largely
transacted over-the-counter (voice brokered) and are reported to the Bank of Uganda for settlement and transfer
of securities. Treasury bills are actively traded with abid/offer spread of 25 to 50 bps. The yield curve of up to
3-years is liquid, but 5-year and 10-year bonds are scarcely
traded. To improve liquidity in bonds, the Central Bank
continues to reopen issues in order to create larger andmore liquid bonds along the curve.
Almost all of the turnover is accounted for by trades in
Government paper. Corporate bonds do not trade much,with most investors in these instruments adopting a
buy-and-hold strategy. The limited sizes and liquidity
in corporate bonds restrict commercial bank interest in
corporate paper.
A turnover of UGX 1.8 trillion was recorded in 2008 in the
Government bond market, which represents a turnoverratio of 0.7, a significant improvement on the ratio of 0.47
recorded for 2007. In 2008, the average volume traded
per day was UGX 6.8 billion 36% higher than the previous
year. The average size of a trade was UGX 2 billion in 2008.
Foreign investors participate in the local market throughthe commercial banks, however the global financial crisis
led to a withdrawal of investment by foreign investors.
Government and corporate securities are listed on the
Uganda Securities Exchange (USE), the country’s principal
stock exchange. It is still very nascent and as of January

176

Uganda2010, it had 12 listed local and East African companies.
Trading takes place on Mondays, Tuesdays and Thursdays
only and by use of the open outcry method. An automatedtrading platform is being considered.

Trend in Secondary market trading annual
turnover in Government securities
2,0

Amount in Uganda Shillings (Trillions)

1,5

1,0

0,5

0,0

2003

2004

2005

2006

2007

2008
Year

Source: Bank of Uganda

Foreign Exchange Market
The Uganda Shilling is a free-floating unitary currency
since 1993. The Central Bank licenses foreign exchange
dealers who have reporting obligations to the Central
Bank. There are no restrictions on the capital, interestand dividend flows of both residents and non-residents
in and out of Uganda; the country’s capital account is fully
liberalized. The main market is the spot market for UGX/
USD and the forward market is short-term in tenor, but
is gradually extending to longer maturities. The market
is also available with considerable depth for UGX/EUR
and UGX/GBP. The interbank foreign exchange market
is active and dealers post live quotes on a Reuters systemwith quotes good for USD 100,000. The BOU may buy orsell USD from time to time to control volatility, but does
not target a rate.

The graph below provides historical levels of the UGXagainst the USD.
UGX per Unit of USD (Year End)
2,000

1,750

1,500

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Derivatives Market
The derivatives market in Uganda is still underdeveloped,with the main instruments being swaps and forwards.

Volumes in the derivatives market are less than 1% of thetotal forex turnover.

Regulation and Taxation
Regulation
The BOU is responsible for the licensing, supervision andregulation of the banking system.

Capital Markets are regulated by the Capital Markets
Authority (CMA) of Uganda. The Uganda Securities Exchange is licensed by the Capital Markets Authority andis the centre for equity and corporate debt market activity.
The CMA also licenses broker/dealers, investment advi-Ugandasors and fund managers in the market and approves all
corporate bond issues.
The BOU issues Uganda Government securities on behalfof the Government. The Bank of Uganda is authorized tohold securities in electronic form on the authorized CSD
for the electronic settlement of all financial instrumentsin Uganda Government securities. The insurance sector isregulated by the Uganda Insurance Commission.
The three regulatory authorities of Kenya, Uganda andTanzania signed a Memorandum of Understanding in
1997 and created an umbrella body known as the East
African Securities Regulatory Authorities (EASRA). They

177

seek to increase crossborder listings, harmonize legal
and regulatory frameworks and develop capital markets
in the region.

Taxation
Withholding tax on Government securities is currently
at 15% on both coupon interest and discount interest atredemption.
There is no capital gains tax on the sale of Governmentand corporate securities. Uganda has entered into tax
treaties with Denmark, Norway, South Africa, the United
Kingdom and Zambia. There is no distinction between
the taxes levied on residents and non-residents.

Clearing and Settlement
The market has an electronic book entry system, withsettlement of T+1 for Government securities, T+2 forforeign currency trades, and T+0 for Repurchase Agreements and interbank trades. The central depository for
Government securities is housed at and managed by theCentral Bank.

Transacting parties submit filled forms to the BOU whichthen transfers the securities. The Uganda Securities Exchange is setting up a Securities Central Depository system
which will facilitate the trading of corporate bonds.

Regulatory Contacts
Bank of Uganda
P.O. Box 7120, Kampala, Uganda
37/43 Kampala Road, Kampala, Uganda
Tel: +256-41-258441-6/258060-9/259090
Fax: +256-41-230878/233818
E-mail: info@bou.or.ug
Website: www.bou.or.ug

Capital Markets Authority
P.O. Box 24565
Kampala, Uganda
8th Floor, Jubilee InsuranceCentre, 14 Parliament Avenue, Kampala, Uganda
Tel: +256-41-342788/342791
Fax: +256-41-342803
E-mail: cma@starcom.co.ug
Website: www.cmauganda.co.ug

Uganda Securities Exchange Ltd.
P.O. Box 23552, Kampala, Uganda
Plot 1, Pilkington Road, Workers’ House 2nd Floor,
Northern Wing, Kampala, Uganda
Tel: +256-41-343297/342818
Fax: +256-41-342841
E-mail: info@use.or.ug
Website: www.use.or.ug

West African Economicand Monetary Union

2009 at a glance

Benin

Population (mn)

8.9

15.8

Population growth (annual %)3.1
FrenchOfficial language

Burkina
Cote
Faso
D’Ivoire

GuineaBissau

Mali

Niger

Senegal

Togo

21.1

1.6

13.0

15.3

12.5

6.6

3.4

2.3

2.2

2.4

3.9

2.6

2.5

FrenchFrenchPortuguese

FrenchFrenchFrenchFrenchCurrency

CFA Franc (XOF)

GDP (Current US$ bn)

6.5

8.6

21.6

0.4

8.4

5.5

13.1

2.9

GDP growth (annual %)

3.8

3.5

3.1

1.9

3.4

3.2

3.4

2.7

GDP per capita (Current US$)

729.4

542.7

1,023.0

264.1

647.1

358.3

1,046.2

441.3

Total Debt (US$ bn)

0.9

1.9

18.8

1.0

2.1

0.9

6.4

1.5

Total Debt/GDP (%)

14.9

21.9

82.7

245.3

25.4

15.9

48.9

50.5

CPI (annual %)

4.3

4.7

5.3

0.4

2.7

2.4

3.8

2.6

Exports of Goods and services (% of GDP)

16.6

9.2

41.7

32.3

27.5

16.9

20.5

37.0

Gross Official Reserves (in US$ bn)

1.1

0.9

2.2

0.1

0.9

0.7

1.4

0.5

Gross Official Reserves (in months ofimports)

7.3

5.5

3.5

5.2

3.9

3.6

3.1

5.7

CFA/ 1 USD (year end)

457.75

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Benin»» The West African Economic and Monetary Union

Fitch

B

B

Moody’s

Not rated

Not rated

S&P

B

B

Burkina Faso
Fitch

Not rated

Not rated

Moody’s

Not rated

Not rated

S&P

B

B

SenegalFitch

Not rated

Not rated

Moody’s

Not rated

Not rated

S&P

B+

B+

Other Member Countries
Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary(WAEMU) comprises eight countries: Benin, Burkina
Faso, Cote d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo.
»» Member countries share a common currency, the
CFA Franc (XOF), a joint monetary policy and aCentral Bank, the Central Bank of West African
States (BCEAO).
»» The regional and national fixed income market isstill at a nascent stage.
»» The Central Bank plays an important role as one of
the main issuing entities in the region.
»» In recent years, member countries started to financetheir public spending through the issuance of Treasury bills instead of Central Bank loans.
»» The number of corporate issues is still limited.
»» Similar to many other African countries, the investor
base is dominated by commercial banks.

G

MAURITANIA

NIGER

MALI

BamakoBissauGUINEABISSAUBURKINAFASO

Ouagadougou

GUINEASIERRALEONECOTE
D’IVOIRE
Abidjan

LIBERIA

Niamey

GHANA

TOGO
BENIN

SENEGALCHAD

AgadezTimbuktu

Dakar

LIBYA

ALGERIA

WESTERN
SAHARA

Lome

Porto
Novo

NIGERIA
Abuja

CAMEROONCAFRICEQUAT.
GUINEA

Gulf of Guinea

CONGO
GABON

DEMOC
REPUBLCON

180

West African Economic and Montary Union Monetary Policy and Money Market
Monetary Policy
The Central Bank’s main policy goal is price stability. The
Central Bank of West African States (BCEAO) sets themonetary policy for the Union and the individual member
states. The Bank focuses on keeping monetary and credit
variables under control and in line with macroeconomic
objectives such as GDP growth, as well as public financesand balance of payments stability.

The BCEAO conducts open market and repo operations
to influence the money market reference rate, known as“Taux Moyen Mensuel” (TMM). This rate is calculated ona monthly basis and is obtained through the weighted
average of the marginal rates of weekly liquidity management operations.

The Central Bank is currently undergoing an institutional
reform process with the goal of adopting an explicit
inflation-targeting mandate. Additionally, the reformseeks to increase the independence of the Central Bank
from the Governmental sphere of influence.

There are several money market instruments available.
The list is extensive and includes Central Bank, Government and regional bank issued Treasury bills and bonds,
certificates of deposit and bonds issued by corporations,amongst others. All these instruments can be used inrepurchase operations between the BCEAO and otherbanking institutions.

Policy decisions are taken by a Monetary Policy Committee,
with policy actions taken when needed and communicatedsubsequently. The Central Bank also publishes a quarterly
publication on monetary policy.

Money Market Fixed Income Market
Government Securities
WAEMU Member states issue Treasury Bills with maturitzies ranging from 7 to 720 days, namely: one week, 1month, 3 months, 6 months, 1 year and 2 years. These
instruments are issued on the basis of a quarterly issuance program and used to finance the short-term budget
needs of member states.
Each individual country also issues longer-term instruments, namely Treasury bonds. These bonds collect funds
dedicated to financing medium and long-term Government
expenditure. The issuance of Treasury bonds is set out
in a program revised every year. The maturities range
from 3 to 10 years.1
The Central Bank conducts the auctions of bills on behalfof WAEMU members with a frequency of two to threeauctions per week. Auctions of Treasury bonds take place
on a monthly basis.
The minimum investment size is XOF 1 million for Treasury bills and XOF 10,000 for Treasury bonds. Issuingprices are published in the press and on the Central
Bank’s website.

1

3,5,6,7,8 and 10 years more precisely.

Participation at auction is restricted to primary dealers
who hold sufficient reserves in their depository accounts
with the Central Bank. If reserves are insufficient, theCentral Bank will suspend participation until the reserveamount has been increased.
The vast majority of instruments are fixed rate, with aperiodical amortization repayment profile. There are a
few bullet type repayment profiles in the market. The
standard day-count conventions are Act/365 for bonds
and Act/360 for the money market.
It is difficult to establish a yearly benchmark yield curvefor individual countries, due to the limited number of
securities on offer.

Non-Government Securities
The West African Development Bank is one of the mainmarket players. There are also a few corporate issuersof note.

West African Economic and Montary Union

181

Selection of West African Development Bank (BOAD) bond issuance in XOF
YearIssuerRatingNominal (in bn
XOF)

CouponCoupon Frequency

Maturity (year)

Remarks

2009

BOAD

N/R

46.35

3.26%

Annual2016

Listed on BRVM

2008

BOAD

N/R

53.65

3.71%

Annual2015

Listed on BRVM

2008

BOAD

N/R

22.50

5-5.5%

Annual2015

Listed on BRVM

2006

BOAD

N/R

15.00

4.91%

Annual2013

Listed on BRVM

2004

BOAD

N/R

17.30

5.35%

Annual2011

Listed on BRVM

2003

BOAD

N/R

25.00

5.34%

Annual2010

Listed on BRVM

2003

BOAD

N/R

20.00

5.48%

Annual2010

Listed on BRVM

Source: BCEAOIntermediaries
Primary subscription of Treasury bills and bonds is tosome extent limited to banks, and national and regional
financial institutions which have a depository accountwith the Central Bank. Asset management and brokerage
houses also have access to the primary market.

Foreign investors can participate in the market throughlocal banks.

Primary Market

Investors

The Central Bank issues Treasury Bills on behalf of WAEMU member states. The West African Development Bankis the main non –Governmental issuer. There are also a
few corporate issuers of note.

Commercial banks are the main investors of Treasury bills
and bonds and have easy access to the primary issuances.

Secondary Market

The Central Bank does not purchase securities for its own
books. Nonetheless, and subject to certain conditions, theCentral Bank may act as the depositary of Treasury bills.

All secondary market transactions must be conducted via
certified intermediaries such as banks, non-bank financial
institutions, regional financial institutions, asset managers
and brokerage companies.

All investors have direct or indirect (via brokers and dealers) access to the primary market.

Most investors adopt a buy-and-hold approach, which
limits the development of an active secondary market.

Foreign Exchange Market
The CFA Franc (XOF) follows a fixed currency peg regime
against the Euro. The franc is not traded outside of the
WAEMU, but is fully convertible against the Euro. The
parity is currently set at 655.957 XOF per 1 EUR.

Foreign exchange controls do not apply to foreign investors
and there is no offshore XOF market. The graph below
provides historical levels of the XOF against the USD
XOF per Unit of USD (Year End)All WAEMU member states are compliant with IMF’s
article VII. As a result, the current account is fully liberalized. The capital account, on the other hand, is only
partially liberalized. Capital flows are authorized except
for resident-owned savings and investments in foreignbank accounts. Gold exports are also restricted. All ofthese transactions require a prior authorization from the
Ministry of Finance.
FX reserves are centralized through the BCEAO and heldin the Operations Account at the French Treasury.

600

500

400
Dec 2004

Dec 2005

Source: Bloomberg

Dec 2006

Dec 2007

Dec 2008

Dec 2009

182

West African Economic and Montary Union

Derivatives Market
There is no derivatives market in the region.

Regulation and Taxation
Regulation
Capital markets fall under the jurisdiction of the “Conseil
Regional de l’Epargne Publique et des Marches” (CREPMF).
Auctions of Treasury bills and bonds are regulated by theCouncil of Ministers from WAEMU
The Central Bank of West African States controls the
Banking Commission which oversees banks and otherfinancial institutions.

Insurance companies are supervised by the Conference of
Insurance Markets (CIMA), which is based in Cameroon
and oversees insurance companies in all WAEMU states
as well as other Central African countries.

TaxationInterest on securities is taxable at 15%. Capitals gains arealso subject to tax. All member countries apply a withholding tax between 6% and 13% on interest on bonds.

Clearing and Settlement
The “Dépositaire Central/Banque de Règlement” (DC/BR)
is the central clearing/delivery and settlement institution.

cerned parties may extend the delivery by mutual agreement.

The delivery versus payment system is fully automatic at
the central clearer level. Each title has its own identification code, the “Numero d’Identification Regional” (NIR).
There are no ISIN codes. Settlement of transactions isconducted at the close of each trading day.

Clearing and settlement in the secondary market is done
via the DC/BR, with no physical delivery required.

The minimum delivery period is T+1 for domestic transactions and T+3 for inter-country transactions. The con-

The DC/BR has a special guarantee fund which may be
used in the event of default by a financial institution.
This mechanism will prevent systemic defaults and/or
market panic.

Regulatory Contacts
West African Central Bank (BCEAO:
Banque Centrale des Etats de l’Afriquede l’Ouest)
BP 3108 Dakar, Sénégal
Tel: (+221) 33 839 05 00
Fax: (+221) 33 823 93 35
Website: www.bceao.int

West African Monetary Union –WAEMU/UEMOA
Commission de l’UEMOA
01 BP 543 Ouagadougou 01 Burkina Faso
Tel: +226 50 31 88 73
Fax: +226 50 31 88 72
Website: www.uemoa.int

Zambia
2009 at a glance
Population (mn)

12.9

Population growth (annual %)2.5

TANZANIA

DEMO. REP. OF CONGOEnglishZambian Kwacha(ZMK)

GDP (Current US$ bn)

11.5

GDP growth (annual %)4.0

GDP per capita (Current US$)

887.7

Total Debt (US$ bn)

1.2

Total Debt/GDP (%)

10.0

CPI (annual %)10.0

Exports of Goods and services (% of GDP)

27.9

Gross Official Reserves (in US$ bn)

1.2

Gross Official Reserves (in months of imports)

3.4

ZMK/ per 1 USD

Lubumbashi
ANGOLA
Kitwe

MALAWI

Currency

Ndola

Kabwe

ZAMBIA

Lilongwe

LusakaBlantyre

ZIMBABWE

Harare
BOTSWANAMOZAMBIQUE

Official language

4,641.00

Source: AfDB, Bloomberg

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» Government securities yield curve currently has tenors up to to 15 years, with issuance points at 91, 182, 273

and 364 days for Treasury bills and 2, 3, 5, 7, 10 and 15 years for Treasury bonds.
»» The Government securities issuance calendar for both Treasury bills and bonds is published at the beginningof the calendar year showing auction dates.
»» The Bank of Zambia is the Central Securities Depository (CSD) and settles all Government securities transactions.
»» The size and liquidity of the secondary market is still a challenge as the secondary market remains underdeveloped.
Weekly Repo transactions average ZMK 350 billion. The secondary market in long-term bonds is not very liquid.
»» The fixed income market still faces the challenge of establishing benchmark bonds which will improve thepricing from the yield curve and enable the pricing from similar long-term instruments.
»» Bloomberg codes for market data:• BOZMM01 / BOZMM02 / BOZMM03 / BOZMM02 / ZMK1= / ZMKF= / ZMK=/ ZATB= / ZAMGB

184

Zambia Monetary Policy and Money Market
Monetary Policy

Money Market

The Bank of Zambia (BOZ) has a principal monetary policy
objective of bringing the inflation rate down to 5% by theend of 2009. The BOZ relies on market-based instruments,
specifically open market operations (OMO) and the saleof foreign exchange, to limit the growth in reserves andbroad money, The Central Bank is considering a transition from reserve money targeting to interest-rate based
monetary policy.

The most frequently used money market benchmark is
the Bank of Zambia rate. This is determined by adding
two percentage points to the 91-day Treasury bill. Theinterbank market is very liquid with most of the 16 commercial banks frequently participating.

Fixed Income Market
Government Securities
Zambia Treasury bills are issued by the Bank of Zambia
on behalf of the Government of Zambia. Tenors are 91-,
182-, 273 and 364-day bills and auctions are held oncea week on Thursdays, with all tenors offered at eachauction. The auction is a Dutch (multiple price) auction
system and is open to individual and corporate investors
with the exception of commercial banks. Settlement isdone on a T+4 cycle.
Zambia Government bonds are currently issued primarily
as fiscal policy instruments. Tenors issued are 2, 3, 5, 10
and 15 years. Auctions are monthly for the 2-, 3and 5-yearbonds, and quarterly for the 7-, 10and 15-year bonds. All
tenors are often offered at a single auction. The auction
is a Dutch (multiple price) auction system and is open to
individual and corporate investors with the exception ofcommercial banks. Settlement is done on a T+3 cycle.
The opposite graph illustrates the trend in the Government securitites yield curve.

Government securities yield curve as at 30 June
2007, 2008 and 200920%

Yields15%

10%91 day 182 day 1 year 2 years 3 years 5 years 10 years 15 years
30-Jun-09

30-Jun-08

30-Jun-07

Source: Bank of Zambia

Non-Government Securities
The Zambian corporate market has had limited activity inthe recent past. Barclays Bank of Zambia, Lafarge cement,
Investrust Bank and Development Bank have issued notes
under medium-term note programs, as listed in the tablebelow. Liquidity in these bonds is very low.

Year of issue

IssuerCouponTenor

Kwacha2003

Barclays Bank of Zambia

91TB+1.25%

11 years

50,000,000,000

2007

Development Bank

182TB+2.50%

5 years

68,620,000,000

2007

Investrust Bank

182TB+2.50%&3.50%

3&5 years

30,310,000,000

2007

Lafarge Cement

182TB+1.25%

5 years

108,000,000,000

Source: Lusaka Stock Exchange

TenorZambia185

Intermediaries
All trades in Government securities must be executed
through the Lusaka Stock Exchange (LuSE). The brokers
therefore have a role to play in matching and processing
transactions at the Exchange. There are no designatedmarket makers and most of the dealing is done overthe-counter. There are four brokers that deal with fixedincome securities at the Lusaka Stock Exchange.

Investors
The Zambian market is growing in diversity with welldistributed holdings of Government securities amongst
all categories of holders, including foreign investors, as
illustrated in the chart below.
Holdings by category of investors as at June 30,
2009 (in percent)

Other,
11.40%

Foreign Investors, 5.20%

Commercial Banks,
38.79%

Central Bank,
19.36%

Pension Funds,
30.20%

participate indirectly through fund managers. Currently,
holdings by insurance companies that participate directly
are less than 1% of total holdings.
There are four asset and fund managers who participate
in the securities market directly, with less than 1% of total
outstanding Government securities.
There are no restrictions on participation of foreign investors in the Zambian debt markets. Foreign investors
participate in the debt market through their local registered banks, and securities are held by their nominatedcustodians. Currently, Barclays Bank Lusaka Nominee
International holds most of the securities for foreign
investors. Foreign investors can also purchase securities
through brokers at the Lusaka Stock exchange. They havetended to invest in shorter-term instruments ranging from91 day to 3 year maturities.
Retail investors access the market directly as competitive
or non-competitive bidders. The minimum bid amountfor competitive bidders is ZMK 30 million and ZMK 1
million for non-competitive bids. All retail investors who
bid on a competitive basis have CSD accounts while noncompetitive bidders have sub-accounts.

Primary Market
Insurance Companies, 0.25%

Source: Bank of Zambia

The Zambian banking sector consists of 18 licensed and
16 operational commercial banks as of September 2009,
including several foreign-controlled banks. The banking
sector held approximately 39% of outstanding Government
securities as of 30 June 2009. These holdings comprised
mostly Treasury bills and bonds up to 3 years maturity.
There are over 240 pension funds in the market, withthe dominant fund being the National Pension Scheme
Authority, however, very few participate directly in the
securities market. The smaller pension funds participate
indirectly through fund managers. By the end of 2009,
pension funds held 24.4 % of the total Government securities holdings.
The participation of insurance companies is not significant. There are a few insurance companies that invest
in Government securities directly, while most of them

The primary market for Government securities is open to
all applicants that have accounts with the central depository at the Central Bank of Zambia. Applicants without
clearing accounts at the Bank of Zambia must accompany
bids with a guarantee by the settlement bank. The minimum bid amount is ZMK 30 million,with multiples of ZMK
5 million thereafter. As of June 2009, total outstanding
Treasury bills and bonds issuances amounted to ZMK
8,389 billion. A handling fee of 2% is currently charged by
the Central Bank for primary market bond transactions.

Secondary Market
A turnover of ZMK 13.7 trillion was recorded in 2008,
which is a turnover ratio of 1.6, a significant improvementon the ratio of 1.3 recorded for 2007. In 2008, the averagevolume traded per day was ZMK 54 billion, 25% higher
than the previous year. Liquidity has been concentrated
at the short 91-day to 3-year section of the curve. The
average size of a trade was ZMK 5.4 billion in 2008.

186

ZambiaTrend in secondary market trading of Government
securities
Amount in Kwacha (Trillions)
15
12
9
6
3
0

2004

2005

2006

2007

2008

as of June30, 2009
Year

Source: Bank of Zambia

Foreign Exchange Market
Zambia’s foreign exchange market was fully liberalized
in 1994 following the removal of restrictions on both thecurrent and capital accounts. The general public can both
buy and sell foreign exchange to commercial banks andbureaux de change. Interventions in the foreign exchange
market by the Bank of Zambia are primarily aimed atsmoothing out short-term fluctuations in the market andmeeting the targets of international reserves.
The main market is the spot market for ZMK/USD; theforward market is short-term, but is developing. The
market is also available for ZMK/EUR and ZMK/GBP.

ZMK per Unit of USD (Year End)
5,000

4,000

3,000

Dec 2004

Dec 2005

Dec 2006

Dec 2007

Dec 2008

Dec 2009

Source: Bloomberg

The opposite graph provides historical levels of the ZMKagainst the USD.

Derivatives Market
There are a few derivative contracts in foreign exchange
which are mostly short-term, with tenors not exceeding
12 months.

Regulation and Taxation
Regulation
The issuance of corporate bonds has to be approved by
the Securities and Exchange Commission. The Lusaka
Stock Exchange (LuSE) regulates the listed securities of

the corporate bond market and trades of the Government bond market. One of the central purposes of the
Bank of Zambia is to regulate commercial banks, leasing
companies, building companies, development banks,

Zambiasavings and credit institutions, credit reference bureaus,bureaux de change and microfinance institutions. Pension
funds and insurance companies are regulated by the Pension and Insurance Authority while securities firms andventure capital funds are regulated by the Securities andExchange Commission.

187

Taxation
Under the current legislation, the income earned on
Treasury bills and Government bonds is subject to 15%
withholding tax. The taxes are deducted at source uponmaturity of the security. There is no capital gains tax on
fixed income investments. Non-residents whose countries
have signed double taxation agreements are eligible toclaim their tax paid with the Zambia Revenue Authority.

Clearing and Settlement
The Zambian Inter-Bank Payment and Settlement System(ZIPSS) is an system that facilitates efficient transfer offunds between banks. The LuSE operates an electronicclearing and settlement process, with trade-for-trade
netting and settlement on T+3. The trades are carriedout through stock brokers. The LuSE also operates anelectronic depository facility or Central Share Depository(CSD) known as the Zambia Central Depository. Investors
intending to transact in listed securities, are required to
trade through the LuSE. The CSD for Government securities is with the Bank of Zambia and efforts have been madeto link the CSD at the Exchange with the Central Bank.

Regulatory Contacts
Bank of Zambia

Securities and Exchange Commission

P.O. Box 30080, Lusaka, Zambia
Bank Square
Cairo Road Lusaka, Zambia
Tel: 260-1-228.888/ 228.903-20
Fax: 260-1-221722/237070
E-mail: pr@boz.zm
Website: www.boz.zm

P.O. Box 35165, Cairo Road, Lusaka, Zambia
5th Floor, Bank of Zambia Annex, Lusaka, Zambia Tel:
260-1-226911
Fax: 260-1-225443

Lusaka Stock Exchange
P.O. Box 34523, Lusaka, Zambia
3rd Floor Farmers House
Building, Cairo Road, Lusaka, Zambia
Tel: 260-1-228391/228537/228594
Fax: 260-1-225969
E-mail: luse@zamnet.zm
Website: www.luse.co.zm

Zimbabwe
ANGOLA

12.5

Population growth (annual %)0.5

Official language

D.R. OF CONGO

Multi-currency system:
ZAR reference and
USD main transacting
currency

GDP (Current US$ bn)

3.5

GDP growth (annual %)3.7

GDP per capita (Current US$)

284.0

Total Debt (US$ bn)

6.6

Total Debt/GDP (%)

186.9

Lilongwe

ZAMBIA

MALAWI

EnglishCurrency

R.D. DU CONGO

LusakaNAMIBIE

Chinhoyi

9.0

Exports of Goods and services (% of GDP)

50.9

Gross Official Reserves (in US$ bn)

N/A

Gross Official Reserves (in months of imports)

N/A

HarareMarondera

ZIMBABWE
Masvingo

ZAM
MO

BOTSWANA

Pietersburg
Gaborone

SOUTH AFRICA

Source: AfDB

Sovereign rating as at March 24, 2010
Long-term

Local Currency

Mutare

BIQ

Bulawayo

CPI (annual %)Blantyre

Foreign Currency

Not rated by either Fitch, Moody’s or S&P
Source: Bloomberg

Summary»» There are no fixed income Government securities in Zimbabwe.
»» The Zimbabwe Dollar is not functional as it was suspended in April 2009. In February 2009 a multi-

currency system was adopted, with the South African Rand as the reference currency and the US Dollar
as the main transaction currency.

Inhambane

OCEAN INDIEN
INDIAN OCEAN

Population (mn)UE2009 at a glance

190

Zimbabwe Monetary Policy and Money Market
With the adoption of dollarization, the Reserve Bank ofZimbabwe’s (RBZ) control over monetary policy was curtailed. The multi-currency system, which the authorities
have decided to maintain until 2012, will provide the very
foundation of Zimbabwe’s Monetary Policy . Given the fis-

cal constraints that come with dollarization, the threat of
hyperinflation that has plagued the country is eliminated.
The focus has turned away from controlling inflation to
attracting private and public capital to Zimbabwe.

Overview of Financial Sector
As of 31 December 2009, the banking system in Zimbabwe comprised 27 institutions: 17 commercial banks, 4merchant banks, 4 building companies, 1 discount houseand 1 savings bank. There were also 16 licensed asset
management companies and 95 microfinance institutions
operating under the supervision of the Central Bank.

The balance sheets of all the banks suffered during thehyperinflationary period. Following the adoption of themulti-currency regime, the RBZ introduced a phased implementation plan for banking institutions to recapitalize
their balance sheets in order to fully meet new prudential
requirements by 31 March 2010. Banks reportedly hedged
the inflation risk through investment in real assets.

Regulation
The Securities Exchange Commission of Zimbabwe has
the overall responsibility of regulating the capital markets.
The Reserve Bank of Zimbabwe is the regulator of theRegulatory Contacts
Reserve Bank of Zimbabwe
P.O. Box1283,
Harare, Zimbabwe
80 Samora Machel
Avenue, Harare, Zimbabwe
Tel: +263-4-703000
Fax: +263-4-707800, 706450
E-mail: rbzmail@rbz.co.zw
Website: www.rbz.co.zw

banking sector and is spearheading efforts to recapitalize
the sector.

Glossary
Bond

A bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay theprincipal and interest (the coupon). Other stipulations may also be attached to the bond issue,
such as the obligation for the issuer to provide certain information to the bond holder, or limitations on the behavior of the issuer. Bonds are generally issued for a fixed term (the maturity)
longer than one year.

Callable Bond

A bond that can be redeemed at the option of the issuer prior to maturity as the issuer has theright to “cawll” the bond at fixed prices and call dates. Maturities may be extended (“extendible) or
shortened (“retractable”).

Capital Market

The market in which corporate equity and longer-term debt securities (those maturing in morethan one year) are issued and traded.

Clearing

The process of exchanging financial transaction details between an acquirer and an issuer to facilitate settlement.

Convertible Bond

These may be converted into the issuer’s common stock or into equity-like instruments.

Crawling Peg
Exchange Rate

An exchange rate adjustment method in which the value a fixed exchange rate is allowed to fluctuate within a certain range of values. A crawling peg allows the exchange rate to adjust over time,hence "crawl," rather than be adjusted by a sudden or dramatic change.

Currency Board
Exchange Rate System

Fixed exchange rate system. Requires maintenance of a specific exchange rate in respect to another currency.

Delivery Verses
Payment (DVP)The delivery of securities in exchange for another asset, usually money.

Dematerialized
Securities

Securities that are no longer held in physical certificates and have been converted to an all-electronic system of bookkeeping.

Depository

A centralized clearing house and repository for securities. A location where securities are actuallystored and where the electronic day-to-day movements of those securities is recorded.

Derivative

A financial contract from which payoffs over time are derived from the performance of assets(such as commodities, shares or bonds), interest rates, exchange rates, or indices (such as a stock
market index, consumer price index (CPI) or an index of weather conditions). The main types ofderivatives are futures, forwards, options and swaps.

Discount House

A firm that buys securities (commercial paper, discounted bills of exchange, Treasury bills andbonds from willing sellers.

Discount Rate

In relation to Central Bank Monetary Policy, is the rate at which specific banks may borrow shortterm funds directly from the Central Bank.

Dutch Auction System

A public offering auction structure in which the price of the offering is set after taking in all bids
and determining the highest price at which the total offering can be sold.

Electronic Book-entry

See Dematerialized Securities

Exchange Control

Restrictions on conversion of a country's currency for another.

Fiscal Policy

Government's revenue (taxation) and spending policy.

Glossary

193

Fixed Income

Debt instruments of companies, government or agencies characterized by a fixed interest rate andstated maturity date.

Flexible Exchange Rate
SystemCurrency exchange rate which is determined by free market forces. Also known as floating exchange rate system.

Floating Rate Note
(FRN)

Bonds for which the coupons are a reference rate plus a spread/margin. This rate is reset on aregular basis and generally constitutes a short-term benchmark rate such as a Treasury bill rate or
LIBOR.

Forward Contract

A contract on which a seller agrees to deliver a specified cash commodity to a buyer sometime in
the future. In contrast to futures contracts, the terms of forward contracts are not standardized.
Forward contracts are not traded on exchanges.

Forward Rate
Agreement

An agreement to borrow or lend at a specified future date at an interest rate that is fixed today.
The borrowing and lending is purely notional as the contract allows the purchaser to fix interest
costs for a specific future period.

Futures Contract

An agreement to buy or sell a fixed quantity of a specified commodity, currency or security fordelivery at a fixed date in the future at a fixed price. Futures contracts are standardized agreements
traded on Futures Exchanges.

Indexed Bond

These are bonds indexed/ linked to non-market indices or assets. Examples include inflationindexed bonds whose coupons are linked to various inflation indices such as the consumer priceindex and wholesale price index. Commodity-linked bonds are linked to the value of commodities
such as agriculture, petroleum and minerals.

Inter-dealer Broker

A brokerage firm operating in the bond or OTC derivatives market that acts as an intermediary
between major dealers to facilitate inter-dealer trades.

Liquidity

The ease with which an asset can be quickly converted into cash without any significant movements in the price. A market is considered liquid if there are ready buyers and sellers of securities
in large quantities.

Managed Float
Exchange Rate System

Floating currency exchange rate system which is not controlled entirely by the market forces ofdemand and supply but is partially controlled by government intervention that limits appreciation
or depreciation of the currency within a range.

MarginIn relation to securities trading, is the difference between the face value of a loan for security purchase and the current value of securities deposited as collateral.

Monetary Policy

The regulation of money supply and interest rates by a Central Bank in order to control, aggregate
demand and, by extension, inflation in the economy.

Money market

The market for short-term debt instruments maturing in one year or less. Examples of money
market instruments include Treasury bills, commercial paper, and certificate of deposits.

Mudaraba

An arrangement where one party provides the funds and the other provides expertise and management.

Multiple-price Auction

Investors making competitive bids specify the rate or yield they are willing to receive for the use of
their funds. Successful competitive bidders pay the price equivalent to the rate or yield they bid.

Murabaha

A particular kind of sale or contract that is compliant with Islamic law.

Musharaka

Similar to conventional partnership with profit and loss sharing.

Mutual Funds

A scheme operated by an investment company which raises money and invests in securities inaccordance to a specific objective.

194

Glossary

Open Market
Operations

Buying and selling of securities by the monetary authority to influence the money supply.

OptionThe right (but not the obligation) to buy or sell securities at a given price (exercise or strike price)
before a given date (expiry date).

Over-The-Counter(OTC)

Trades that are not executed on a Securities/Stock Exchange.

Pegged Exchange Rate

System where the value of a country’s currency, in relation to another currency is fixed at a specificconversion rate.

Primary Dealer

A designation usually given by an issuer of securities or the agent to banks, broker/dealers or otherfinancial institutions that meet specific criteria like capital requirement, liquidity and primarymarket participation.

Primary Market

The market for new securities issues from the issuer.

Real-Time Gross
Settlement System(RTGS)

A system where transactions between financial institutions is done electronically. Funds are immediately credited to one institution from another.

Repo

A contract where a seller of securities agrees to buy them back at a specified time and price. Also
referred to as Repurchase Agreements or buyback.

Reserve Requirement

Amount of money and liquid assets that deposit money banks must hold in cash or on depositwith the Central Bank, usually a specified percentage of their demand deposits and time deposits.
Also called reserve ratio.

Secondary Market

A market where an investor purchases a security from another investor and not the original issuer
after the original issuance in the primary market.

Securitization

Conversion of assets (typically loans and other receivables) into securities usually to sell them on
to other investors.

Settlement

Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale.

Spot transaction

A transaction requiring immediate delivery and full payment.

Structured Investment
Vehicle (SIV)

A type of fund which invests in long term, high-yield securities with money that it raises by selling short-term securities of lower yield and profits from the difference in rates.

Sukuk

Instruments/securities that comply with Islamic law (Shariah).

Swap

An agreement between parties to exchange future cash flows that are determined by an underlying such as currency, interest rate, equity and commodity.

T + 1 ( 2, 3, 4)

Refers to settlement of securities from the trade/ transaction date T +1 means settlement is one
day after the trade date; T+ 2 is two days after the trade date and so on.

Treasury BillA negotiable debt obligation issued by government and backed by its full faith and credit, having amaturity of one year or less.

Treasury Bond

A long-term government obligation having a maturity of more than one year.

Umbrella Fund

Mutual fund that primarily invests in other funds. Also referred to as fund of funds.

Yield to Maturity

The rate of return anticipated on a bond if it is held until the maturity date. YTM is considereda long-term bond yield expressed as an annual rate. The calculation of YTM takes into accountthe current market price, par value, coupon interest rate and time to maturity. It is also assumed
that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" forshort.

Disclaimer 195

Disclaimer
This publication has been prepared solely for information purposes only and is based on material from sources that
the AfDB believes to be reliable. Whilst every care has been taken in preparing this publication, the AfDB makes norepresentations, warranties or undertakings (express or implied) and accepts no responsibility or liability as to the accuracy or completeness of the information contained herein. All statements, figures, opinions and estimates containedin this publication may change at any time after the publication of this Guidebook without notice. Nothing in thispublication shall be construed, implicitly or explicitly as containing any investment recommendation or advice, andconstituting an offer of, or an invitation by or on behalf of, AfDB to purchase or sell any securities. If you are in any
doubt about the contents of this publication or the information to which this publication relates, you should obtain
independent advice in respect of any information or product detailed herein. The AfDB provides no investment, taxor legal advice and makes no representation or warranty about the contents hereof. No responsibility is assumed by
the AfDB for any general, consequential, indirect, incidental, exemplary or special damages arising from the use ofor reliance on this publication. You are to rely on your own independent appraisal of and investigations into (a) the
condition, creditworthiness, affairs, status and nature of any issuer or obligor referred to and (b) all other matters andthings contemplated by this publication.
Some of the pages in this publication have website addresses of third parties. These are for your convenience only.
AfDB does not endorse and is not responsible for the content of these websites and the views and opinions expressedin any referenced website do not necessarily state or reflect those of the AfDB.
This publication has been sent to you for your information. By accepting this publication, you agree to be bound by
the foregoing limitations.
Copyright 2010 African Development Bank.
All rights reserved.

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Angle de l’avenue du Ghana et des rues
Pierre de Coubertin, Hedi Nouira
BP 3231002 Tunis Belvédère
TUNISIA
Contact:
Group Treasurer
Tel: +216 7110 2028
Fax: +216 71 33 0632
E-mail: FTRY4@afdb.org
Website: www.afdb.org