Finance Minister embarks on eurobond roadshow

• Posted on April 4, 2016
• by Nana Kwesi Coomson
• Comment

Finance Minister Seth Terkper is expected to lead a government team to London and New York this week to launch a fifth Eurobond this year.

Even though the country could pay high yields because of her high debt levels, the meetings nonetheless will showcase Ghana’s economic performance, especially its medium-term potential and appeal to investors to lend money to the Government of Ghana for infrastructure development.

Ghana’s total debt stock as at December 2015 stood at GH¢97.2 billion, representing over 70 percent of Gross Domestic Product (GDP).

In December 2015, Parliament endorsed the government’s plans to issue a fifth Eurobond of up to $1 billion to refinance debt and support its 2016 budget.

The country currently has an agreement with the IMF under a three-year deal to boost the economy, which is reeling under high budget deficit, astronomical public debt and inflation that have constantly been higher than targets set by government.

Mr Terkper told Reuters that he looked forward to more favourable market conditions this year based on the energy sector’s potentials.

The country is expecting the delivery of first oil from its new Tweneboa-Enyenra-Ntomme field by August, lead operator Tullow Oil has indicated.

Ghana issued a 15-year $1 billion Eurobond in October with a yield of 10.75 percent after having first targeted a $1.5 billion bond at 9.5 percent. It was the fourth sale since its 2007 debut.

“The only challenge is that markets are still volatile – we are watching the external factors, especially crude oil prices,” he said, adding that the government was monitoring keenly and would react appropriately.

Meanwhile, analysts have indicated the country could pay high yields because of the country’s high debt levels.

According to a senior lecturer at the University of Ghana, Dr Ebo Turckson, the country’s high debts levels were likely to lead to a yield of 11 percent.

“The yield normally depends on so many factors and I keep on saying the more we keep on piling up our debts the more those who lend to us will also see us as risky borrowers and therefore will want to inch up the interest rate a little bit. So with a current debt being about 76 percent of our GDP and we looking at going for more loans, it is going to increase our debt to GDP levels and definitely we will pay higher interest rate,” the economist stated.

He stated that the last time Ghana sold her Eurobonds, the interest rate from the US was almost zero percent but now it has inched up.

“We would have to compete with assets sold in the US which is slightly higher than the last time we sold which is not good.”

By Samuel Boadi