Economist cautions Ghana government over US$50 billion Century Bond

US$50 Billion Century Bond a Catalyst for Chronic Economic Hardship



Ghana may be the first African country to issue a 100-year bond ($50 billion Century bond) which would be history in the making, but it may have serious economic implication on the country’s economic growth and development. Ghana’s economic hardship is likely to go from bad to worse if the government does not tread cautiously on its plan to issue a US$50bn century bond next year to support infrastructure development and other falling due economic obligations.

Developed economics and emerging economics are building infrastructure by generating domestic revenue through innovative policy initiatives, changing the narrative on tax collection and adding value to their natural resources for foreign revenue and not excessive borrowing like Ghana is doing now. Raising bonds to service debt repayment, payment of wages & salary and other statutory payments would plunge our country into a serious chronic economic hardship.

At a time when the cedi is record low against the dollar, banking crises, domestic revenue dipping and growing public concern on government to restore confidence back into the economy, and growing hardships, a $50 billion century bond is not the solution. The governments appetite to raise funds at all cost by all means is bloating expenditure, ie fund the FREE SHS, NABCO, Employee Compensations and the ballooning debt serving is what is preempting the issuance of the $50 billion century bond.

Weaning Signs

Ghana may be endangering her debt ratio if we go ahead to issue the $50 billion century bond. With a GDP of US$58.9 billion and debt to GDP ratio of 62.3% after the rebasing of the economy at end of July and a rating of B, Ghana is still confronted with high ballooning debt serving and persistence shortfalls in domestic revenue generation.

Again, Ghana may be expose to a worsening exchange rate risk as the cedi has experience a continues depreciation of 7.5% as at Sept 2018 as compared to 4.4% same period last year and this is due to collapse of confidence in the local currency, excessive borrowing, local product pricing in dollars etc.

Moreover, the persistent under performance of domestic revenue generation due to narrowing tax collection, nonperformance of State-Owned Enterprises (SOEs), loopholes in public service delivery processes, corruption and tax evasion makes it unadvisable for government to issue the $50 billion century bond which may plunge the economic fortune of the country.

While total government revenue and grants for 2017 amounted to GHS28, 429.20 million (14.1% of GDP) against a total expenditure of GHS37, 705.00 million (18.7% of GDP), government spends a total of GHS 19,595.10 million and GHS14, 909.80 milllion on employee compensation and interest payment respectively.

Against this background, one important question refers to the economic consequences of a US$50 billion century bond on the high and potentially persistent debt servicing/interest payment of Ghana. While the economic growth of the country is likely to have a linear negative impact on the debt to GDP ratio, high levels of public debt are likely to be deleterious for growth and potentially worsen the economic situation in the country.

Economic Impact

The government’s current appetite for excessive borrowing may worsen the already stiff-necked situation the private sector finds itself in due to large and sustained borrowing by the government resulting in substantial reduction in financial capital available for the private sector firms as well as causing trade imbalances and economic hardships.

Government borrowing may affect economic growth and development, as inflation is a measure of living standard in a country, a sustained pattern of large budget deficits as a result of government borrowing can lead to disruptive economic patterns of high inflation.

Currently many people face a situation where the prices that they pay for food, transportation, shelter, and healthcare are rising much faster than the wages they receive for their labor; there is a widespread unhappiness as their standard of living declines.

It is interesting to note that the current hardship in Ghana is halting almost all economic activities in the country because it very difficult for people to spend and if people are not spending the economy would contract impacting on the private sector which needs to drive growth.


Government must pull the breaks on the intention to issue the $50 billion century bond and go back to the drawing board to do proper assessment of the economy and find more innovative means to add value to our raw materials to generate more revenue.

There is the urgent need for government to initiate policy measures to change the narrative on agriculture as we need to move to agro culture, mechanization, and employ more innovative technology especially for the planting for food and jobs agenda.

Government borrowing must be done prudently and must be used to generate revenue and value. Putting Ghana back to work and “A Ghana beyond Aid” can’t be achieve with excessive borrowing rather through innovative ways of adding value to our raw materials and human resources.

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