Government plans to issue a 10-year syndicated $2 billion bond before year end to clear legacy debt among its power utilities, Professor Thomas Akabzaa, Chief Director at Ministry of Petroleum, has hinted.
He said the lion’s share of the proceeds of the bond was meant for Volta River Authority (VRA), with the rest spread between GRIDCo and the Electricity Company of Ghana.
“What we are trying to do as a government is to put all the debt into one portfolio,” the Chief Director said.
Professor Akabzaa told Reuters on the sidelines of an African oil conference in Cape Town, South Africa yesterday that, the three institutions all have big legacy debts (in total) hovering around $1.5 billion.
“The bond will be issued before the end of the year, certainly,” he said.
Professor Akabzaa said they met banks last week and the government was putting the final touches to the bond, with issuance protocols for the bond expected to be finalised at the end of June.
Discussions have been held with a number of banks, including Stanbic Bank, Ecobank and Standard Chartered Bank, he added.
It would be recalled that at the end of the first five months of this year, Ghana had issued four domestic bonds, one each in January, March, April and May.
Two out of the four domestic bonds issued by the Bank of Ghana (BoG) were undersubscribed by 15 per cent and 32 per cent in January and in May. The funds were raised at an interest cost of 24.75 per cent and 24.95 per cent respectively.
The other two bonds issued in March and April were oversubscribed but at high yields.
With the May bond issue, Ghana managed to raise only GH¢341 million out of a targeted GH¢500 million. The three-year GH¢500 million bond issued in January was only able to raise GH¢426.23 million. That auction, which was open to both foreign and local investors, saw international bids totalling only GH¢20 million.
Moody’s Investors Service, a leading provider of credit ratings, research, and risk analysis, said in an annual report released in New York on Monday that, Ghana’s B3 rating and negative outlook reflect the sovereign’s large gross financing needs, high debt burden and low debt affordability.
Elisa Parisi-Capone, Vice President, Senior Analyst and co-author of the report, said: “Ghana’s gross financing needs are expected to reach 20 per cent of GDP over the forecast horizon and the country is facing tight domestic and external funding conditions.”
She added: “Ghana’s credit profile is also exposed to lower-for-longer commodity prices which weigh on the balance of payments and fiscal revenues.”
Moody’s assessed the country’s fiscal strength as “Very Low”, reflecting the country’s high debt burden and very low debt affordability resulting from high interest expenditures as a share of GDP and of revenues.