Gov’t borrows GH¢125m from domestic market

• Posted on October 16, 2015October 16, 2015
• by Nana Kwesi Coomson
• Comment

Government borrowed GH¢125.2 million in treasury notes from the domestic bond market between July 6 and September 14, 2015, Business Finder can confirm.

Out of this, GH¢79.6 million was issued on September 11. GH¢32 million issued on July 24 and GH¢5 million issued on August 28.

The yield for the 2-year notes was however 23 percent, higher than the previous 22.5 percent.

According to a circular from the Ghana Stock Exchange (GSE), the interest payment would be done half yearly from the date of issue.

The debt instrument is already trading on the Ghana Fixed Income Market (GFIM), operated by the GSE.

The issue was opened to non-resident foreigners who also have the privilege to acquire the 3-year, 5-year and 7-year bonds.

The circular added that a 10 percent withholding tax on interest income to corporate holders will apply.  However, interest income on government bonds to individuals will not be subjected to withholding tax.

The country’s public debt stock hit GH¢94.5billion in June, 2015, further raising concerns of debt overhang if government does not ease its appetite for borrowing. It represented 70.9 percent of Gross Domestic Product (GDP).

This is however compared to GH¢89.5billion, equivalent to 67.5 percent of GDP in May 2015.

The debt has further escalated by a billion dollars following the recently launched Eurobond.

To this end, the International Monetary Fund (IMF) has stated that Ghana is responsible for its own debt.

“Ultimately Ghana is responsible for the management of its debt. Whilst we can advise and support by creating space for more borrowing within the context of the Extended Credit Facility at the end of the day it is Ghanaians that will approve the borrowing or not”, a communiqué from the Fund revealed.

It further cautioned the nation that it will have to be very selective with regard to new concessional borrowing.

Some economists, market watchers and the minority parliamentarians’ fear Ghana’s rising debt level could replicate the Greece crisis where over-borrowing has crippled a member of the European Union economy.

But Finance Minister, Seth Tekper disagrees, saying, there is a debt management strategy where a sinking fund has been created from oil revenue to take care of Ghana’s debt.

Part of that strategy is also to allow state owned enterprises repay for monies borrowed.

By Kwabena Yeboah