Seth Terkper, Minister of Finance
Seth Terkper, Minister of Finance

The Ghanaian government will issue a second Eurobond this year to restructure its existing debts, Vice President Paa Kwesi Bekoe Amissah-Arthur announced on Tuesday.

The vice president disclosed this during the launch of the May 2013 edition of the Regional Economic Outlook (REO) for sub- Saharan Africa by the International Monetary Fund (IMF).

The amount to be raised (yet to be announced) will also be used to reduce the interest burden on the budget and enable government to finance critical infrastructure projects.

“The government acknowledges and will be mindful of the cautioned major problem of risk exchange in these transactions as stated in the report and will examine cheaper options for the financing of the country’s infrastructure,” said the Amissah- Arthur, who is also the immediate former governor of the country’s central bank.

Amissah-Arthur defended the decision, pointing out that one of the difficult choices the government had to make was between expenditure on infrastructure and maintaining fiscal discipline, which necessitated the exploration of broader financing options for infrastructure.

“In Ghana, the current challenge we face is how to extend our fiscal space through public expenditure rationalization and revenue mobilization,” he reiterated.

Beside the Eurobond, he said the government was developing new financing options that would allow the sharing of responsibility for infrastructure between the public and private sectors.

The vice president stressed, “To develop our societies and further reduce poverty, we need a better understanding of how to strengthen the growth momentum in a multi-speed and tentative world.”

“We need to strike a balance between creating fiscal space and rebuilding macro-economic buffers between investing in critical infrastructure and the commitment to achieve the Millennium Development Goals (MDGs),” he added.

Speaking directly from the report, Sean Nolan, deputy director of the African Department of the IMF, said the combination of favorable global and domestic conditions strengthened the option of issuing sovereign bonds for sub-Sahara African countries.

He however cautioned that countries should consider these bonds as part of their overall medium-term debt strategy and follow best practices in issuing them.

Nolan also advised new entrants to ensure they received sovereign ratings before venturing into the bonds market.

In 2007, Ghana accessed 750 million U. S. dollars from its Eurobond issued that year for investments in critical infrastructure, including energy.

The 10-year dollar-bond, sold at par to yield 8.5 percent, enjoyed high patronage as the order books were said to have testified to abundant appetite for the debut bond from the West African country.

Former minster for finance and economic planning Kwabena Duffuor announced in 2009 that a Sinking Fund would be set up to service the bond which is set to mature in 2017.

However, Governor of the Bank of Ghana Henry Kofi Wampah said the Sinking-Fund had yet to be set up.

Despite that, Wampah believed Ghana needed to take advantage of the favorable conditions in the bonds market before the global financial crisis receded, as the current rates were far lower than that of the 750 million Eurobonds issued in 2007.


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