Terkper Leads Road Show To Raise $1bn

Finance Minister Seth Terkper

Finance Minister Seth Terkper and some government officials have embarked on a road show to convince international investors to patronize government’s $1 billion Eurobond.

The road show, which started on August 1, 2016 and takes the team to London, Germany and the US, could end by August 6 in New York.

Government has indicated it intends to use funds from the Eurobond to finance certain projects earmarked in this year’s budget and settle some maturing debts.

Standard Chartered PLC, Citigroup and Bank of America are believed to be the transaction advisors.

 

Debt profile

 

As at May, this year, the total debt incurred by the National Democratic Congress (NDC) administration, led by President John Dramani Mahama, stood at GH¢96.1 billion.

The NDC inherited a total debt of GH¢9 billion from the New Patriotic Party (NPP) in 2009 but has increased it to GH¢105.1 billion.

Government was asked by investors to pay 10.75 percent as interest in the previous $1 billion Eurobond.

The recent road show, if successful, could further increase the total debt of the country.

Government admitted that it was planning to earmark some GH¢10.4 billion in the 2016 budget as interest payments.

 

Cash-strapped despite borrowings

 

Government is heavily indebted and it does not have enough funds to carry out its activities from all indications, hence the massive borrowings.

The debt-to-GDP ratio (66.4 percent at end of May 2016) is likely to balloon soon.

Government says it is not planning to apply for the Highly Indebted Poor Country (HIPC) status.

 

IMF Delays

 

After its third review of government recently under its extended credit facility (ECF) agreement, the IMF has delayed the announcement of the performance of Ghana under the programme to pave the way for the release of the third tranche.

Others have argued that considering the uncertainties surrounding the United Kingdom (UK)’s vote to leave the European Union (EU) and the move by the US to keep its interest rate, there is the likelihood that Ghana may secure a favourable rate for its 5th Eurobond.

International ratings agency FITCH recently assigned provisional B ratings to Ghana’s fourth Eurobond, which is better than the B- ratings accorded the country in terms of its credit worthiness.

By Samuel Boadi

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