Gov’t raises US$2.25bn in domestic bonds

Government has successfully raised over US$2 billion in various bonds issued recently. The bonds consisting 15-year and 7-year maturities had a coupon rate of 19.75. According to a release by the Finance Ministry, the 15 and 7-year bonds raised a total amount of US$1.13 billion.

“In addition, the Ministry of Finance raised the cedi equivalent of US$1.12 billion in 5 and 10 year bonds via a tap-in arrangement. These activities raised a total of US$2.25 billion and resulted in the lengthening of the maturity profile of the instruments available on the domestic market.

This issuance, the Ministry said, represents the largest amount issued by a sub-Saharan African country in a day with the pricing obtained also consistent with the initial price range of 18.95% - 19.85%. The issuance attracted a number of global portfolio investors including a very substantial investment in the 15-year bond by an unnamed respected global financial investor.

The Minister of Finance, Ken Ofori-Atta, is reported as saying the issuance proceeds will be used to repurchase and/or retire a portion of the higher coupon short-term public debt instruments, meaning there will not be an overall increase in the total debt stock.

“This is in line with our liability management strategy which seeks to re-profile our public debt stock, extend tenors, reduce short term rollover pressures, and lower domestic interest cost. Additionally, this issuance will further help improve our foreign exchange reserves by over US$2 billion and further support the cedi,” the Ministry said.

According to the Finance Minister, “this is an indication of the markets’ belief in our commitment to building an effective public financial management system, improve the country’s debt sustainability outlook and mitigate the crowding out of the private sector. It is imperative that we re-profile our total debt stock of US$30 billion which should help put us on a path of ‘Ghana beyond Aid’.

This successful bond issuance and the significant amount raised, especially the longer tenor 15 year, is an indication of the strong appetite for Ghana Bonds due to the markets renewed confidence in the long term prospects of the Ghanaian economy and a major vote of confidence in the new government’s economic policies, fiscal measures and programmes as outlined in the 2017 Budget.

Parliament on last Friday passed the Appropriation Bill for the 2017 budget, including the landmark re-alignment of statutory funds which frees up about GH¢4.5 billion in fiscal space for 2017.