Official calls for deepening of bond market

Accra, July 25, GNA - Dr Sam Mensah, Technical Adviser on Financial Market at the Ministry of Finance and Economic Planning, said on Tuesday no amount of donor funding was going to propel the country to a middle-income status unless a conscious effort was made to deepen the capital market.

Speaking at a workshop on bond market development and corporate credit risk analysis, Dr Mensah said the country needed massive investment of 13 billion dollars to meet her development aspirations in the energy, communications, transportation, roads, and water sectors.

But donors would meet only about half of this amount, leaving a funding gap of 5.8 billion dollars in the next three years. Dr Mensah said a major way was to finance the difference through the issue of bonds on the capital market.

According to him, the country's relatively stable macro-economic environment provided the necessary platform to aggressively launch into the bond market.

The first step was to encourage parastatals to look at the debt market to raise their financing requirements. In this direction, he said, the Government was determined to list the instruments on the stock exchange later this year. However, there is the need to extend the yield curve of government instruments from the current three years to five years or more and also to enhance the capacity of various government agencies in the area of bond issue.

He said the country's bond market lagged behind those of sister countries on the Continent, citing the case of Botswana and Tanzania, where they had instruments of yield curves up to 10 years. Dr Mensah said there was the urgent need to review the enabling legislation as to the borrowing status of some of these government agencies.

He said the economy had the capacity to absorb any bond issue, citing the growth in the life insurance market and the long-term savings scheme when it became operational as major sources of fund for the bond market.

Mr Kofi Yamoah, Managing Director of the Ghana Stock Exchange, said banks and various corporate institutions and the Government had paid lip-service to the development of the bond market. He said there was the need to deepen the debt market for financing infrastructure development such as schools and roads, among other things.

Dr Jay Sa-Aadu, Professor of Finance, the University of Iowa, who is the resource person for the seminar, said bonds constituted nearly two-thirds of the global market value of all securities. He said companies, government agencies and district assemblies should be encouraged to finance their development activities through bonds.

Professionals and staff of the Central Bank, companies, securities firms, investment banks and commercial banks are attending the seminar being organized by the Ghana Stock Exchange. 25 July 06