Energy bond not ‘total failure’ – Professor Bokpin
Economist and Head of Finance at the University of Ghana Business School, Professor Godfred Alufar Bokpin, says government’s recently issued Energy Bond fell short of expectations although it cannot be said to be a failure.
According to him, the government still has an option of making amends for the shortfalls in the process.
“Given the fact that government had given a certain period within which it will do the whole bond issue, one will be very careful to say it is a total failure because there is an option for them to go to the market to determine the market conditions. But given the indications that we received earlier, and government’s own confidence that the bond will be more successful and what we have, then it fell short of our expectations and that is a fact,” he said in an interview on Eyewitness News on Thursday.
Prof. Bokpin also said he believes it would have been more appropriate for the government to issue the bond as a sovereign bond rather than a corporate bond. “My considered view is that given this circumstance, it would have been more preferable for government to go for a sovereign bond rather than a corporate bond. What we are trying to do is that, we want to keep our debt to GDP ratio within the target for the year and for next year, but at the end of the day, this special purpose vehicle is fully backed by government…. One school of thought can easily classify this energy bond typically as a public debt even though Ghana government will say it is not… In terms of strategy, we will not say the government was totally wrong,” he added.
Government issued a ten year and seven year bond with the aim of getting GHc6 billion to offset the legacy debts of the energy sector, which was about GHc10 billion.
But in all, a total of GHc4.69 billion was realized even after a seven day extension period.
The 7-year component raked in 2.4 billion cedis as targeted, at an interest rate of 19 percent.
However, the 10 year bond failed to hit the 3.6 billion cedis mark.
Minority chide gov’t over energy bond
The Minority at a press conference on Wednesday accused the government of causing financial loss to the state, claiming that administrative processes cost the country ghc177 million.
According to them, the below GHc 6 billion yield was a solid basis for the Finance Minister, Ken Ofori-Atta, to be hauled before the House to explain why investment advice from places such as the IMF among others was ignored.
They also accused government of breaching the constitution because they did not seek the approval of Parliament before issuing the bond.
But a Deputy Minister for Finance, Kwaku Kwarteng, has explained that, the bond struggled because of the low-interest rate of 19%, saying the investors wanted more, but the government was not willing to go beyond 20%.