Ghana accepted 1.123 billion cedis ($294 mln) for a three-year domestic bond with a yield of 24.5%. Proceeds of the bond, which was open to offshore investors, will be used to finance the government’s 2016 budget. It was sold through a book-builder’s system arranged by Barclays Bank, Stanbic and Strategic African Securities.
Total bids received amounted to 1.13 billion cedis with 71% of that coming from offshore investors, the source said. The West African nation paid 24.75% yield on a three-year bond arranged by book-builders in January.The major commodities exporter is implementing a three-year aid programme with the International Monetary Fund (IMF) to fix an economy dogged by budget deficits, inflation and a widening public debt.
Ghana’s total public debt is around 70% of GDP, while consumer inflation stood at 19.2% in March, up from 18.5%% the month before. The yield on Ghana’s weekly benchmark 91-day treasury bill was 22.8017% last week.
Meanwhile, Professor Godfred Bokpin said government’s decision to go to the local bonds market to issue domestic securities, may bring some relief to banks in the country. According to him, even though the move may crowd out the private sector from accessing funds, it may also offer some comfort for banks that are trying to cut down lending to the private sector due to increased risks as a result of the economic conditions and the recent power crisis.
Touching on the implications on the public debt, Professor Bokpin stated that currently, government has no other option than to resort to the domestic market to raise funds for infrastructure development. He pointed out that any attempt by government to increase taxes now may not appear economically prudent since the ordinary Ghanaian is already burdened with imposition of tax.
So far, government has raised about GH¢10.62 billion cedis through various debt securities and going by the Bank of Ghana’s notice served of government’s plan, the total value of issued securities this year will reach GH¢15.5 billion by the end of the April.