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Sun, Nov

INVESTOR CONFIDENCE IN GHANA RISING - As Gov’t Raises Unprecedented $2Bn Eurobond

Business & Economy

The various prudent measures put in place by the Akufo-Addo-led New Patriotic Party government continues to yield positive results, with soaring investor confidence in the country’s economy.

The various prudent measures put in place by the Akufo-Addo-led New Patriotic Party government continues to yield positive results, with soaring investor confidence in the country’s economy.

 

The latest indication is the successful $2billion raised by government in its first ever Eurobond with the longest length of time, comprising ten and thirty-year bonds, meant to improve infrastructure and in turn create jobs.

The government was seeking to raise 750 million dollars. However, upon completion, the Sovereign bond accrued two billion dollars from investors.

The interests of 7.62 and 8.62 percent have also been cited as being lower and very favourable, amidst prevailing harsh conditions on the international market.

The ten-year note is expected to mature in 2029 whilst the thirty year bond matures in 2049.

A sovereign debt market watcher has described it as a marked success for Ghana because of the low yield and bigger size.

“The pricing revision may have aided the deal and left investors unhappy,” he said.

Much amount raised is to pay off debts left by the Mahama government, key among them being the $750m borrowed less than 3 months before the 2016 elections.

What this means is that, in addition to the premium, the government will pay about $819m to retire the 2022 bonds and still be left with another $750m new money to spend for the budget, making it a total of $1.569 billion, with an extra $431m.

The Finance Minister, Ken Ofori Atta, in a media interview, stressed the need to channel the resources into high-yielding ventures which would address the unemployment situation in the country.

“A couple of the key issues that our government committed to tackle are infrastructure deficit and job creation. The momentum and tempo for rolling out the infrastructure needs and supporting our projects which will create jobs is what we are going to be focusing on, together with the implementing agencies and the other resources that find the resources to back them up,” he said.

On the hugely successful issue of the bond, the Finance Ministry explains the development represents the first time a sub–Saharan country with a rating of B stable has priced a sovereign Bond at such low costs indicating strong investor confidence.

“It is also the first time Ghana has extended its international capital market funding to 30 years,” a statement from the ministry added.

 The statement attributed the favourable response to an improvement in the economic conditions.

“This is a reflection of the improving Ghanaian situation for which reason we are benefiting from lower rates despite recent turbulent activities on the emerging markets front. These cheaper bonds will help us to pay off the expensive ones issued by the previous administration and save mother Ghana money which can be invested in dense job initiatives. Investors have expressed increased confidence in the early turn around signs and have chosen to reward Ghana for it,” the Ministry stated.

Meanwhile, Vice President of Imani Ghana, Kofi Bentil, has said the difference between what was issued by the previous Mahama administration with respect to the interest and that under the Akufo-Addo government showed that “numbers don’t lie.”

Taking to his Facebook page, Mr Bentil wrote. “NPP has obtained very favourable rates; and the profile of these bonds are also very favourable. Honestly it is a far cry from the ones we did under the previous government. There is a marked improvement in the competency levels with which our economy is being run now, and the international markets are hailing it and voting with their pockets!!”

Gabby Asare Otchere-Darko, Founder of the Danquah Insititute and Publisher of the Daily Statesman, for his part, said the NPP government was doing two things remarkably well at the same time: fixing the mess left behind by the erstwhile Mahama government and at the same time growing the economy to create jobs and prosperity.

“Take…for instance, Ken Ofori-Atta and his team raised $2bn on a cheaper coupon with longer maturity on the bond market after an amazingly successful roadshow. Much of it is to pay off NDC debts, principally, the $750m they borrowed less than 3 months before the 2016 elections. The liability management for the tender is about $700m notional amount.”

He added: “Again, this is the first time ever we have issued a 30yr bond and at rates lower than what the NDC issued a 5yr bond in 2016 (9.25%).”

 

 

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