General News of Fri, 21 Apr 201710

NDC lied about $2.3bn bond - Finance Ministry

The Ministry of Finance says its attention has been drawn to a statement issued by the Minority in Parliament, which seeks to cast negative aspersions on the recent GH¢9.7 billion (US$2.25 billion) domestic bond issue by the Government of Ghana.

Reacting to the report, the ministry described the statement as unfortunate, especially coming from Cassiel Ato Forson, a former deputy finance minister, who knows the workings and processes for the issuance of domestic bonds.

The ministry has therefore called on him to stop making such “baseless allegations.”

Minority’s claims

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Additionally, it said the transaction should have received parliamentary approval because it technically should be considered to be a dollar-denominated sovereign bond issue due to the level of foreign investor participation, and that in its view that amounted to a private placement.

NDC’s track record

The ministry recalled that the Mahama-led NDC administration on November 30, 2015 welcomed Franklin Templeton (FT) to participate in GoG’s 5-year bond issue at a coupon rate of 24 percent.

Also, on June 27, 2016, the same NDC government engaged Frank Templeton in another GoG 5-year bond at a coupon rate of 24.5 percent.

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Reaction

The ministry explained that the issuance of the current bond was not shrouded in secrecy nor “cooked” for any particular investor.

“The bookrunners, (Barclays, Stanbic and SAS), on behalf of the ministry of finance, have been mandated since 2015 to issue these domestic bonds on a regular basis as per the debt issuance calendar which the ministry of finance (MoF) puts out every quarter.

“Also the book runners announce and publish every impending bond issue to the market the week of issue and provide price guidance to the market. This particular bond issue was no different and was done in conformity with the established process. It was announced by the Book Runners to the market on March 30, via email and same published on MoF and Bank of Ghana (BoG) websites with settlement on April 3.

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“The conventional processes for the issue of bonds using the book building approach were adhered to in this particular issuance. It is our understanding that the said investor engaged various market participants and other key institutions, including the IMF, before deciding to participate in the bonds. It is worth noting that local investors also participated.

“The said investor participated in the issuance in the manner they have always done since 2006 through their local Primary Dealer, Barclays Bank, and their local custodians, Standard Chartered Bank and Stanbic Bank.

“To have obtained preferential treatment, all the above mentioned institutions would have had to conspire to do so, a situation which is unfathomable. The investor in question, FT, has held Government of Ghana bonds of up to $2 billion prior to this transaction. Indeed, FT has been buying and investing in government bonds since 2006.”

Parliamentary approval

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Impact of transaction

According to the ministry, “The issuance brought in significant amount of foreign currency, which was converted into cedis to purchase the bond, helping to strengthen the value of the cedi and providing the much-needed respite for the citizens of Ghana.

“The transaction would also lengthen the maturity periods of government debts, thereby reducing the short term redemption and rollover pressures on government.

“The proceeds from the bond issue are to be used for liability management and for the re-profiling of our domestic debt stock by repaying more expensive short-term debt as it matures, and as such it shall not add to the total debt stock of the nation.”

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