Govt converts debts into bonds

The Government has converted 50 per cent of the total domestic debt of ?6.1 trillion into a three-year bond.

The bond will be launched on September 7.

Mr Yaw Osafo-Maafo, Minister of Finance, speaking at a news conference in Accra yesterday, said the scheme will allow government to achieve fiscal savings of ?190 billion on domestic debt savings payments for 2001.

He said the interest on the bonds will be paid bi-annually and will be adjusted in line with changes in Consumer Price Index so as to take account of accrued inflation.

The minister said the bond which will be launched at an auction at the Bank of Ghana, will be listed on the Ghana Stock Exchange for secondary trading.

In the 2001 budget statement, government hinted on the possibility of exploring avenues to ease the domestic debt burden through the conversion of existing short-term domestic debt obligations to medium-term instruments.

The present total debt stock at the end of May is represented by 91-day, 182-day treasury bills and one year treasury notes.

Interest payments on the debt in the year 2000 amounted to ?1,446 billion which represents 25 per cent of total government expenditure.

Stating the benefits of the bond, Mr Osafo-Maafo said since the bond holders will be protected fully against inflation, interest payments on the bonds will be at the real rate of interest.

The minister said government has equally put in place mechanisms to facilitate the orderly redemption of the bonds on maturity and said the bonds have been designed to promote the establishment of a long-term debt market in the country.

He said as the macro-economic environment stabilises and inflation comes down, more instruments such as zero-coupon bonds, conventional coupon bonds, municipal bonds and infrastructure finance instruments will be put on the market.

“What we are trying to do is to change the whole financial intermediation profile of the economy where government will reduce the cost of borrowing to enable the private sector to thrive,” the Minister stated.