Ghana’s Eurobond Will Help Private Sector By Containing Local Rates

Ghana’s Eurobond Will Help Private Sector By Containing Local Rates

Ghana’s planned Eurobond will prevent the government from borrowing from the domestic money market and in turn reduce the chances of crowding out the private sector by ensuring small and medium enterprises can access loans at affordable rates, the country’s Finance Minister said.

The Eurobond worth about $1 billion will be issued in the second half of 2015, but a decision on the exact dates will be reached “at the end of June into early July”.

Seth Terkper, Ghana’s finance minister, said that concerns by the International Monetary Fund (IMF) over raising domestic debt levels did not mean that the multinational lender was against the West African county’s Eurobond issuance.

“Government is fully aware of the rising debt stock and we have taken pragmatic measures to clear all our domestic debt, at the same time maintaining infrastructural development. These indicators have to be taken in total to understand the dynamics,” Terkper told Business Day.

The IMF, which extended a $918 million credit facility to Ghana in April, has said before that it’s worried about the rising public debt stock, now at $17.2 billion.

The credit facility is meant to help the country stabilize an economy that faces high levels of public debt, a rapidly depreciating local currency, a widening budget deficit and a runaway inflation rate.

Terkper told Business Day the government needed the Eurobond to help it refinance a previous Eurobond issued in 2007 before it matures in 2017. This he says will save the country from incurring more roll-over debt.

The new Eurobond will also be used to complete some key infrastructure projects that were commenced with short-term securities. Fund raised from the sovereign bond will be used to retire some of these short term domestic debt instruments.