Finance Minister Mr. Seth Terkper is set to meet international investors in the US and Europe to encourage them participate in Ghana’s bid to raise US$ 1.5billion Eurobond to finance projects outlined in the 2015 budget and pay off maturing debts.
Mr. Terkper, who is leading a team of financial experts and top officials from the ministry and the Bank of Ghana is expected to engage global investors; securing their commitment to lend Ghana the facility.
The team will meet investors in London, Berlin and New York over the week to convince them on the viability of the facility to impact on the lives of Ghanaians.
If secured, one billion dollars out of the facility would be used to finance the 2015 budget to reduce the reliance on short-term expensive domestic debts, while the remaining 500 million dollars would go into re-financing domestic and external debts.
Also, the facility would enable Ghana finance its liabilities promptly at the lowest possible cost with marginal risk.
Mr. Terkper prior to securing parliamentary approval for the loan in July this year explained that “ the impact of the sovereign bond issue, which would diversify the country’s funding sources, would be relatively neutral to the overall debt stock, as it would mostly replace debt already included in the public debt stock”.
He continued that though part of the bond would go into financing capital expenditures this year, the structure of the facility differed from previous Eurobonds.
As part of measures to reduce its interest rate, the bond would be backed by the World Bank Policy Based Guarantee that would enable it to be issued with a higher rating than the current sovereign guarantee.
The bond issue will also be backed by a sinking fund from the portion of the excess of the Stabilization Fund earmarked for debt amortization.
The amortization and the sinking fund plan, which is backed by the Petroleum Revenue management Act, will smoothen the redemption obligations between 2023 and 2026.
Ghana, currently has three Eurobonds outstanding with maturity profiles of October 2017 for the first bond of 531 million dollars, August 2023 for the second bond of 1 billion dollars and January 2026 for another 1 billion dollars.
The maturity profile of public debt indicates that, 75 per cent of domestic debt was short to medium term with short term debt constituting 39 per cent of the country’s debt portfolio as at December 2014.
The current maturity profile of the country’s domestic debts posed a number of challenges which included high risks associated with frequent rollover of short and medium-term debt because of volatile interest rates.
The current high domestic interest rate also indicates that rollovers were increasing the debt services component of expenditures, a situation Mr. Terkper has assured the Finance Ministry will cure with long term facilities.
