Ghana yesterday began a roadshow to engage institutional investors outside the country to raise 1.5 billion dollars from the European Bond Market.
The roadshow is expected to end with the government securing commitment from investors to lend the money to the government to finance projects outlined in the 2015 budget and pay off maturing debts.
The Ghana team led by the Finance Minister, Mr. Seth Tekper, yesterday engaged investors in London.
The team which also includes the Governor of the Bank of Ghana, Dr. Henry Kofi Wampah, Deputy Minister of Finance Cassiel Ato Forson, Mr. Millison Narh, Deputy Governor of the Bank of Ghana and other officials from the Finance Ministry and the Bank of Ghana, are expected to take the roadshow to the United States.
Parliament in July, approved a request by the government to raise 1.5 billion dollars from the European Bond Market to manage Ghana’s liabilities and to support the 2015 budget.
One billion dollars out of the facility would be utilised to finance the 2015 budget to reduce the reliance on short-term expensive domestic debts, and the other 500 million dollars would go into re-financing domestic and external debts.
Finance Minister, Seth Terpker, in making the request for the approval for the financing plan, told the House that the move would enable the country to finance its liabilities promptly at the lowest possible cost with marginal risk.
He said the impact of the sovereign bond issue, which would diversify the country’s funding sources, would be “relatively neutral” to the overall debt stock, as it would mostly replace debt already included in the public debt stock.
The minister told the lawmakers that though part of the bond would go into financing capital expenditures this year, the structure of the facility differed from previous eurobonds.
He explained that the bond would be backed by the World Bank Policy Based Guarantee that would enable it (bond) to be issued with a higher rating than the current sovereign guarantee, in order to reduce interest rate.
The bond issue will also be backed by a sinking fund from the portion of the excess of the Stabilisation Fund earmarked for debt amortisation.
The amortisation and the sinking fund plan, which is backed by the Petroleum Revenue management Act, will smoothen the redemption obligations between 2023 and 2026.
Some economic analysts are optimistic that the roadshow would be successful due to the country’s engagement with the International Monetary Fund.
Speaking in an interview with the Times yesterday Dr. John Gatsi, an economist and senior lecturer at the University of Cape Coast University Business School, said beyond the IMF supporting Ghana’s fiscal consolidation the country’s medium to long-term had been anchored by the World Bank’s provision of guarantees for ENI Gas project.
“I strongly believe that the roadshow would be successful also because the USA has maintained its interest rates and also some countries within the European Union have given indications of reducing their interest rates,” he said.
Dr. Gatsi said the Fitch Ratings affirmation of ‘B’ for Ghana would not have any effect on the roadshow.
“I believe that Ghana would raise the 1.5 billion dollars at a reasonable interest rate,” Dr. Gatsi said.
By David Adadevoh