Ghana To Save GHC600 Million From Issuing $2.25 Billion Domestic Bond

Finance Minister, Ken Ofori-Atta has schooled Parliament on details of government’s $2.2 billion bond it issued in April this year.

The Minister was compelled to do this by a Half Hour Motion moved in Parliament by Haruna Iddrisu, the Minority Leader on 31st May, 2017.

The motion which was unanimously accepted by the House, requested the Finace Minister to provide detailed information on the $2.25 billion bond.

The minority also by the motion sought to know details of the full complement of the documents relating to the issuance, participation, the utilization of the proceeds and the currency in which the bond was settled.

Usefulness of the bond

In his statement presented on the floor of the House, Finance Minister established the usefulness of the bond stating that the country had saved almost GHC600 million by issuing the $2.25 billion domestic bond.

He also explained that the revenue accrued has been used to pay off some of the country’s debt that had matured and also to finance some budgetary allocations.

“Mr. Speaker, to date out of the total amount raised about 2.5 billion has been used to re-profile the debt and 1.1 used to finance the budget we will continue to use the remaining to re-profile the debt and short term maturing bills. Mr. Speaker we shall continue with our re-profiling and this is not the end of it”

“…In other words we will borrow these billions without adding to Ghana’s debt stock although in the initial instance the gross public debt increases because we have built up assets in cash in our books we will use that to swap the maturities as it come. Contrary to claims of financial loss the expected saving from this transaction in respect of interest cost is estimated at ghc610m in 2017. This clearly shows the financial savings were accrued to government. In other words we borrowed not to increase the debt stock but to rather decrease the cost of servicing the interest of pre-existing debts.”

He associated the decline in interest rates and the decrement of the 91day treasury to 12% to the bond. He added that it will add to the savings the country will enjoy from issuing the bond.

Investor Confidence

Ofori-Atta was confident that even though majority of the subscribers were external investors, it will have no impact on the economy of the country.

He insisted that there are the involvement of the firm Franklin Templeton in the issuance of the firm has no conflict of interest situation and poses no risk to the country.

He explained that the nature of the subscriptions indicated that there is high level of investor confidence in the bond.

“It should be noted that high external participation in our domestic bonds is common and the participation of some key players including Franklin Templeton in our bonds is common. In fact the first 10year bond in 2016 had 90% external participation and 10% domestic participation”

He clarified that the situation was as a result of low interest of domestic investors in long term bonds even though the situation is gradually changing.

He suggested that the improvement in Ghana’s credit ratings as affirmed by Fitch will greatly affect investor confidence and make Ghana a safe haven for investment.

Currency denomination

Responding to Minority’s motion on the aspect of currency used in the transaction, Finance Minister emphasised that it was in cedi denomination and not Dollars as speculated.

“On April 3rd 2017 the country issued two new bonds and reopened two others. All these bonds were domestic Ghana Cedi bonds in the aggregate amount of GHC9.7 billion and were settled in cedis. They were not Ghana Cedis bond”

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