Ethiopia is the latest African state to receive a strong response on its first foray into the international debt markets. Investors have been eyeing Africa's sturdy growth rates and Ethiopia's economy is now expanding by about 9 percent a year.
“This amount will be spent on industry zones planned for construction across the country soon. They will attract investment and generate foreign currency,” Finance Minister Sufian Ahmed told reporters.
Offering cheap labor and power supply, as well as improving transport and other infrastructure, Ethiopia aims to be a hub for textiles and other industries by attracting investors who are moving some manufacturing plants from China and other Asian markets, where costs are rising.
Ethiopia's government is setting up a new industrial park and expanding another at a total cost of $250 million as part of efforts to shift away from farming.
Another three manufacturing hubs are planned across the country in the next decade, including a Special Economic Zone in the eastern town of Dire Dawa of 3,000 to 20,000 hectares.
Plagued by power cuts, Ethiopia's bid to becoming a hub for manufacturing will depend on raising power production. The country plans to boost generating capacity to 10,000 megawatts from 2,000 MW now within three to five years.
Much of the additional power would be generated from the 6,000 MW Grand Renaissance Dam under construction on the Nile.
Sufian said some of the proceeds from the Eurobond will be used to construct transmission lines connecting Ethiopia with Djibouti, as well as building two sugar factories in the country's eastern and southern regions.
Despite strong growth, Ethiopia has limited hard currency earnings, making its debt-servicing capacity weaker than some African states. Analysts believe it will also be more difficult for Ethiopia to build foreign reserves, which now cover little more than two months of imports.