Parliament approved the newly introduced $1.5 billion Eurobond yesterday as it prepares to rise today for recess, shooting up Ghana’s debt pegged at GH¢90 billion as at May, 2015. Part of the money is to be used to service the country’s rising debt.
The new Eurobond is to replace the earlier $1 billion approved by the House late last year, which had statutorily been quashed by the statutes of the House to enable the new one to take effect.
According to the Finance Committee’s report presented to the House by its chairman, James Klutse Avedzi, Parliament approved a 2014 Eurobond funding plan with a ceiling of $1 billion, with an option to increase it further by $500 million – with the additional amount targeted at the refinancing of more domestic and international debts.
The report said when the government issued the $1 billion Eurobond in 2014, no transactions were undertaken under the two-year master registration option because of unfavourable market conditions.
The report indicated that the new bond transaction in 2015 is designed to achieve the refinancing objectives and provide cheaper and longer-term resources for financing the 2015 budget.
The report pointed out that the finance minister, justifying the need for the new Eurobond at the committee level, said the current maturity profile of the nation’s domestic debt poses a number of challenges which include high risks associated with the frequent rollover of short and medium term debt as a result of volatile interest rates.
“The current high domestic interest rate also indicates that rollovers are increasing the debt services component of expenditure,” the minister was quoted as having told the Finance Committee.
“The maturity profile of public debt indicates that currently 75% of domestic debt is short-to-medium-term, with short-term debt constituting 39% as at December 2014. In addition, there are three Eurobonds outstanding with maturity profiles of 8.5% in October 2017 ($531 million), 7.875% in August 2023 ($1 billion) and 8.125% in January 2026 ($1 billion),” the finance minister told the committee in defence of the new $1.5 billion bond.
The New Patriotic Party (NPP) Member of Parliament for Effutu, Alex Afenyo-Markin, however expressed concern about the inability of the government to provide details of investments which greater part of the Eurobond is going to be used for, and asked the government to provide such details to Parliament later.
Parliament will today also approve the supplementary estimates of GH¢865.5 million for government to spend for the rest of the year.
By Thomas Fosu Jnr
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