<\/p>\n
As part of measures to raise revenue and ease pressure on the central government, Chairman of the Research Committee at Tesah Capital, Professor Elikplimi Agbloyor, is recommending that managers of the economy consider lengthening the nation\u2019s existing debt profile through the issuance of a 30-year domestic bond<\/p>\n
Currently, the longest-tenured domestic debt instruments are a 6-year bond, a 7-year bond, a 10-year bond and a 15-year bond, with the longest tenor being a 20-year bond introduced in 2019.<\/p>\n
The 20-year bond \u2013 which was issued through a shelf offering ostensibly to extend the tenor, yield curve, and establish a benchmark by deepening the domestic market and leading a better price discovery as well as a deepening the secondary market \u2013 missed its target amount of GH\u00a2450million.<\/p>\n
In an interview with the B&FT, Prof. Agbloyor \u2013 who doubles as an Associate Professor in Finance at the University of Ghana Business School (UGBS) \u2013 stated that the issuance of a long-term cedi-denominated bond would, among other things, minimize the likelihood of a default; which would in turn offer investors some degree of confidence.<\/p>\n
\u201cIn this conversation about what can be done on the monetary and fiscal sides, one thing \u2013 which I have not seen much discussion around \u2013 is lengthening the debt profile, in particular maturity of the debt. If we were to introduce, say, a 30-year domestic bond, it would reduce the pressure on government as we would not have to pay immediately. Additionally, it could reduce our credit spread as well as the estimated probability of default,\u201d he stated.<\/p>\n
He however noted that the current market conditions coupled with lingering concerns over longer-dated bonds would make a local currency-denominated instrument a tough sell.<\/p>\n
Data from the Bank of Ghana (BoG) indicate that on a year-to-date basis the cedi has depreciated by 15.8 percent, 8.2 percent and 8.9 percent against the US greenback, British pound and euro, respectively.<\/p>\n
Furthermore, headline inflation has jumped by 11 percentage points, year-to-end-April, accelerating to 23.6 percent with little sign of abating.<\/p>\n
\u201cIt is easier to issue these longer-term bonds if the economy is strong. Looking at where inflation is currently, for instance, it is only to be expected that investors would demonstrate some resistance,\u201d Prof. Agbloyor said. \u201cBut I still believe the longer-term security should be explored.\u201d<\/p>\n
Real interest rates, however, continue to remain negative, as the central bank\u2019s benchmark policy rate (19 percent) and that of the Treasury\u2019s bills (91-day, 18.2 percent) are outpaced by inflation, resulting in investor hesitance.<\/p>\n
This was evident when, in April, of the Treasury\u2019s total target size of GH\u00a25.21billion across 91- to 364-day bills, it was only able to raise GH\u00a22.97billion from investors; missing the mark by GH\u00a22.24billion and representing a 35 percent dip compared to what was recorded for the previous month.<\/p>\n
Source: B&FT<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Featured Video\n<\/p>\n\n
\n Disclaimer<\/span>: Opinions expressed here are those of the writers and do not reflect those of Peacefmonline.com. Peacefmonline.com accepts no responsibility legal or otherwise for their accuracy of content. Please report any inappropriate content to us, and we will evaluate it as a matter of priority.<\/span><\/td>\n<\/tr>\n<\/table>\n