Ghana’s latest Eurobond was issued on October 7 and was its fourth to date. It has the highest interest rate (10.75%) to date due to the global pressures facing emerging markets and is the first with a 15-year tenure.
A $400m guarantee of the issue from the World Bank prescribed that Ghana use the proceeds to refinance its existing debts, in particular its 2007 Eurobond set to mature in 2017.
Terkper stressed that the government was committed to continuing on a path of fiscal consolidation to live within its means and to put structures in place to minimise the country’s debt acquisition.
The country’s medium-term outlook was good considering the investments the government had made in the economy, in particular in the energy sector, he said. The discovery of a second major oil field and reforms to public sector financial management had boosted investor confidence during the Eurobond roadshow, for example.
But he acknowledged that the country had also faced challenges including a decline in commodity prices, shortfalls in energy and inflation increases.
Unfavourable market conditions meant the country only borrowed $1bn as oppose to $1.5bn in the recent bond issue, Terkper said. The plan initially had been to use $1bn for debt refinancing and $500m as new capital.
Terkper maintained that since parliament had approved $1.5bn there is still an opportunity to go back to market and borrow the remaining $500m to cover the deficit.
Ghana also plans to develop municipal bonds to finance development projects by local government.
Such a programme would require municipal governments to prove to investors that they are capable of raising revenue to pay for such projects, for example by putting into place measures to ensure the collection and security of property taxes in the municipality.
