Ghana settles on GHC438m in 10 year domestic bond

The Government of Ghana (GoG), thebftonline.com has raised an amount of 438 million Cedis (110 million) in its ten - year Cedi Bond. The debut Cedi bond though was highly over subscribed was at a fixed yeild of 19.0 percent.

Information available to thebftonline.com indicates that the offer which was also open to foreign investors, drew bids of 726 million Cedis which far more than the initial 200 million Cedis target the government was hoping to raise.

The issuance of this bond was part of government’s revised calendar for August to December this year where it intends to raise up to some GHC25.3 billion.

Of this amount, GHC23.8 billion has been allocated to be used to settle pending bonds or notes nearing maturities with the remaining amount of money being some GHC1.4 billion being fresh issuance which will be used to meet government’s financing requirements.

The successful issuance of the bond would go a long way to boost government’s long term debt management strategy, which, among other things, is focusing on minimising and/or replacing expensive shorter dated instruments with longer dated issuances.

Prior to the issue, the West African country's longest local currency debt maturity was seven years.

And this comes at a time that Ghana, is currently implementing a three-year economic stabilization programme deal with the International Monetary Fund and some believe that the introduction of the 10-year debt is the best way to borrow for the longer-term and ease interest rates.

Total Public Debt

Ghana’s total public debt now stands at GH¢109 billion as at July 2016, which translates into about 65.9 percent of GDP, according to data released by the central bank.

The debt stock, according to the central bank, grew from GH¢101.1billion in January to about GH¢108.9 billion as at the end of July this year.

In terms of the composition of the debt, there was virtually no increase in the external debt component, which only rose to GH¢60.7billion from GH¢60.6billion, and remained at 36.4 as a percentage of GDP.

But then the government picked up US$750million Eurobond in September.Total interest payment is estimated at GH¢10.5billion, equivalent to 6.6percent of GDP and 24.1 percent of total expenditure. Of this amount, GH¢2.2billion will be expended on external interest, while GH¢8.2 billion will be for domestic interest payments.

Also the amount to be spent on interest payments this year dwarfs the GH¢6.7 billion planned for capital expenditure.

As a percentage of total expenditure, interest payments will account for about a quarter while capital expenditure makes up 12.7 percent.

Ghana Raises 2-Year US$94.64m Euro Bond

Government on October 13, 2016 successfully issued a US Dollar denominated bond on the domestic bond market. The 2-year bond, which was highly subscribed, yielded an amount of US$94.64 million at a coupon rate of 6 percent, consistent with the initial price range of between 5.5 percent and 6.5 percent.

On settlement, this 2-year bond becomes one of our country’s lowest yield bonds aside the 2017s which are currently trading at about 5.45 percent and maturing in less than a year.

The offer, which was open to resident investors only, attracted a total of 26 bids with a face value of US$99.64 million.