AfDB issues first-ever dirham bond worth 1 billion dirhams
The AfDB has issued its first-ever bond in Moroccan dirhams, worth 1 billion dirhams over 7 years, before extending the approach to other African currencies.
The African Development Bank (AfDB) has issued its first-ever bond denominated in Moroccan dirhams, worth one billion dirhams, through a private placement to qualified investors rather than a public offering. The seven-year bond carries a variable interest rate indexed to the Moroccan Overnight Index Average (MONIA), the country's benchmark money-market rate. The move opens the door to more dirham-denominated financing from the Bank, whose operations in Morocco had so far been mostly in euros and dollars.
Why the Bank chose the dirham
The AfDB is responding to demand from clients who want to borrow in local currency to limit their exposure to foreign-exchange swings. It also plans to build a dedicated dirham treasury portfolio, which could be funded in part by converting some of its foreign-currency holdings. The Bank describes Morocco as a "pilot ground" for this approach, before gradually extending it to other African currencies, citing its long-standing partnership with the Kingdom, the size of its operations portfolio there, and the maturity of Morocco's financial system.
The operation was supported by Morocco's Ministry of Economy, Finance and Administration Reform, the central bank Bank Al-Maghrib, and the Moroccan Capital Market Authority (AMMC). Attijari Finances Corp acted as financial advisor, while Attijariwafa Bank and CDG Capital placed the bond with investors.
A long-standing partnership, a market set to grow
Morocco has been a member of the AfDB since its founding in 1964, making it one of the Bank's oldest partners on the continent. Since 1978, the Bank has mobilized close to 15 billion euros to finance more than 150 projects in the country, in sectors including transport, energy, water, agriculture and social protection. The bond issuance comes as Morocco has climbed in global investment-attractiveness rankings, with the AfDB also aiming to help widen the hedging instruments available on Morocco's market and strengthen liquidity in its derivatives market, which helps financial players better manage interest-rate and currency risks. Observers say the experiment's success could encourage other international financial institutions to issue dirham-denominated debt of their own.