In a world awash
with negative yields, Ghana offered debt returning more than 20% — and
investors weren’t interested.
The West African nation sold 162.1 million cedis ($30 million) of 20-year bonds
Thursday with a yield of 20.2%, well short of its target of raising 450 million
cedis, as investors balked at the term and currency risk.
“The duration is too long for the level of investor confidence in the economy,”
Anthony Asare, the Accra-based head of treasury at GCB Bank Ltd., the nation’s
biggest lender and a primary dealer in government debt, said by phone. “People
are not very certain over that length of time.”
Ghana, which completed a four-year International Monetary Fund program in
April, raised its fiscal deficit projection for the year to 4.5% of gross
domestic product from 4.2% in a mid-year review of the budget. Inflation
quickened to 9.4% in the year through July as the cedi declined about 10%
against the dollar. The Ministry of Finance warned earlier this month that the
country is at “high risk” of debt distress.
“The yield pick up is not sufficient to compensate for the risk,” Mark Bohlund,
an Africa economist at Bloomberg Economics, said in an emailed response to
questions. “If you’re a foreign investor then you not only care about the yield
on the bond but also at what exchange rate you can repatriate your money.”
Bloomberg
