Suspended Eurobond reflects low investor confidence – Ken Thompson
The Chief Executive Officer of Dalex Finance, Ken Thompson has stated that the high interest demand on the suspended issuance of Ghana’s Eurobond reflects investors’ assessment of the economy.
According to him, investors will always push for high interest rates when the risks are high.
The Ministry of Finance yesterday announced that Government has put on hold plans of its fifth Eurobond which was scheduled to take place next week. Government was seeking to raise about 700 million dollars, to retire the 2017 bond but investors demanded high coupon rate.
Speaking to Citi Business News, Mr. Ken Thompson maintained that the investors may have also being influenced by the fact that, the recent assessment by the IMF is still not out.
“One of the conditions in the IMF programme is that the Bank of Ghana should not finance the government. But parliament wants 5 percent. The recent review by the IMF Board has still not come out yet. It affects investor confidence,” he said.
Mr. Thompson explained that investors will always measure the level of risks in an economy before they decide to invest.
“I think that is it. The higher the risk, the higher the interest rate that will be demanded. That is how investors react.”
He stated that the development means that government must do more to meet the indicators set by the IMF to bring back confidence among investors.
“At this time of historically low interest rates the rate on our bond is that high. It reflects investor sentiments. That is why it is high,” he reiterated.
Mr. Thompson was of the view that there is still an opportunity to meet the IMF conditions since the programme is still ongoing. Suspension of 5th Eurobond The Ministry of Finance announced on August 4, 2016 that government has put on hold plans to issue its fifth Eurobond which was scheduled to take place next week. Government was seeking to raise 700 million dollars, majority of which was to be used to retire Ghana’s first Eurobond which matures next year .
Finance Minister, Seth Terkper led a team of government officials as well as financial advisers to convince investors in London and New York to patronize Ghana’s next Eurobond. But a statement from the finance ministry on Thursday said government has put the issue on hold till market conditions are right.
“The Government will continue to build on this dialog with international investors while monitoring the markets and the IMF Board process with respect to the Third Review of the Program and will issue new notes at the optimal time and the right conditions”.
Instead government ‘will proceed with a capped cash tender offer, up to 100 million dollars of the Ghana 2017 bonds issued in 2007, in line with Ghana’s buyback program’.
Despite receiving positive feedback from investors on the ongoing fiscal consolidation process Ghana was unable to convince investors to dish out cash at a rate lower than 10.75 percent obtained in the last Eurobond.