Finance Ministry replies Minority’s ‘baseless allegations’ on $2.25b bond

The Ministry of Finance has responded to recent allegations by the Minority in Parliament that the April 3 bond issued by government was skewed in the favour of cronies and relatives of the Minister of Finance.

At a press conference addressed on Tuesday, April 18 by former Deputy Finance Minister Cassiel Ato Forson, the Minority said the bond was issued in secrecy with Franklin Templeton Investment Limited’s Trevor G Trefgarne getting 95 per cent of the total.

Mr Trefgarne, the Minority cited, is a friend of Ken Ofori-Atta’s. But in a release on Thursday, the Ministry said that conference was “unfortunate especially as it was fronted by Cassiel Ato Forson, a former Deputy Finance Minister, who knows very well the workings and processes for the issue of domestic bonds and as such, should not be making such baseless allegations”.

Find below the release:

The attention of the Ministry of Finance has been drawn to a statement issued by the Minority in Parliament which seeks to cast negative aspersions on the GH9.7 billion ($2.25 billion) domestic bond issue of the government of Ghana.

The Ministry considers the statement as unfortunate especially as it was fronted by Cassiel Ato Forson, a former Deputy Finance Minister, who knows very well the workings and processes for the issue of domestic bonds and as such, should not be making such baseless allegations.

As such, the Ministry has no choice but to surmise that these allegations are maliciously designed to malign and negate the positive news and rave reviews this landmark transaction has garnered, both locally and internationally.

The Minority statement sets out three major claims which the Ministry will like to clear.

(a) That the issuance was shrouded in secrecy to the extent that other investors were denied the opportunity to participate in the transaction.

(b) The transaction was “cooked” to favor a particular investor (Franklin Templeton (FT)) just because a director of one of the funds FT manages, knows the Finance Minister; and

(c) 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 the view of the Minority, it amounted to a private placement.

Response

To the aforementioned claims, the Ministry responds as follows:

The issuance was not shrouded in secrecy nor was it “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 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. FT was not the only participant, there were over 25 other buyers including other foreign entities, who all brought in dollars to convert to cedis to buy the bonds.

This bond issue, like all the others done prior could not have been designed to favour any single investor. 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 USD 2 Billion prior to this transaction. Indeed FT has been buying and investing in government bonds since 2006. This issuance, like all other domestic bonds issued under this bond program since 2015, did not require Parliamentary approval.

Approval was given under the initial application to Parliament in the 2015 Budget Statement and Economic Policy document, to run such a bond issuance program. The Ministry of Finance has the mandate to fund the deficit as contained in the budget approved by Parliament through the issuance of debt instruments and to manage the countries debt stock

Impact of this Transaction.

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 much-needed respite for the citizens of Ghana The transaction will 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, as such, it shall not add to the total debt stock of the nation.

This deal is a positive move in the current debt management strategy being pursued by the government and should be applauded.

Conclusion

The Ministry hereby informs the general public to disregard these allegations as they are unfounded and malicious and seek to undermine the credibility and integrity of your Government.

(Signed)

ISSUED BY THE PUBLIC RELATIONS UNIT MINISTRY OF FINANCE