Ghana Raises $2 Billion Bond …$750m To Support Budget

Ghana has raised a total of US$ 2.0 billion from its 2018 sovereign bond issuance, which was concluded on Thursday May 10, 2018 – an indication of a strong investor confidence.

The 10-year bond raised $1 billion at 7.627%, while the maiden 30-year bond raised another $1 billion at 8.627%.

A statement, issued by the Public Relations Unit of the Ministry of Finance, said the demand for Ghana’s credit peaked in excess of US$ 8.0 billion, representing an over subscription of three times the targeted amount.

“$750m of the issuance represents new debt, while a portion of the remainder will be used to swap for more expensive existing Eurobonds, as well as other liability management operations,” it said.

It explained that the issuance had some notable characteristics such as being the first time a Sub – Saharan African country with a rating of B Stable having priced a sovereign Bond at that low costs, indicating a strong investor confidence.

“It is also the first time Ghana has extended its international capital market funding to 30 years,” it stated.

“It must be noted that despite the size, $1.25 billion, which would be used for liability management would not add up to the debt stock of the country as it is debt neutral.”

No Pressure On Debt Stock

A deputy Information Minister, Kojo Oppong-Nkrumah says $2 billion sovereign bond secured by the government won’t put pressure on Ghana’s debt stock.

Speaking on Eyewitness News, he explained that Ghana now has better debt sustainability because of an improved productivity base.

He noted that the Akufo-Addo administration has gradually reduced the country’s debt-to-GDP ratio, through the rate of debt accumulation, to 69.2 percent, from in 73 percent in December 2016.

“Of course, we cannot bring it in one year to zero. We are going to have to bring it down gradually on a slope.

By reducing that, that is why now, we have come down to 69.2 percent,” he said.

Key to this has been the reduced borrowing to finance the budget. In 2016, GHc16 billion was borrowed to fund the budget, but the figure is not expected to exceed GHc 10 billion in 2018, Mr. Oppong Nkrumah said.

“We notice therefore that as we bring that curve down, the GDP also goes up because we are investing the little resources into productive activities and not just consumption activities. Therefore, the debt sustainability measure shows that we are coming down. So yes, we are not out of the woods yet, but we are gradually coming out of it.”

$750m To Support Budget

Meanwhile, Finance Minister, Ken Ofori Atta has indicated that $750 million raised from the international capital markets, would be used to finance the 2018 budget.

According to him the government plans to direct the funds to areas such as Irrigation infrastructure, Rehabilitation of Warehouses and Silos, Fisheries and Aquaculture inputs, Education, Road, and Rail infrastructure.