Ghana Considers Second Dollar-Bond Sale

May 26 (Bloomberg) -- Ghana is considering selling its second dollar bond next year to tap investor demand as the start-up of oil production boosts economic growth and narrows the budget deficit, Deputy Finance Minister Fifi Kwetey said.

The government is planning a “no-deal roadshow” as early as the fourth quarter to gauge international investors’ appetite, Kwetey said in an interview yesterday in Abidjan, the commercial capital of Ivory Coast. “I’m certain that in 2011, we’ll be looking at” selling a bond, he said.

Ghana sold its first global bond in 2007, raising $700 million to help fund the construction of roads and power plants. After that, the budget deficit surged to 24 percent of gross domestic product in 2008 and the global credit crisis sent the currency plunging 49 percent against the dollar in the year through June 2009, pushing inflation to 20.7 percent that month.

“The only reason why we didn’t go back to the market since 2007 is because we had our fair share of turbulence,” Kwetey said. “It’s difficult to tell a good story when the budget deficit is that high, when inflation has lost control. But now we can tell a good story.”

The government plans to cut the fiscal deficit to 7.5 percent of GDP this year, while the inflation rate fell to a 28- month low of 11.7 percent in April. Inflation will probably slow to less than 10 percent for the first time since 1999, possibly by September, Kwetey said.

Ghana is the world’s second-biggest cocoa producer after Ivory Coast and the largest gold producer on the continent after South Africa.

Infrastructure Projects

A global bond will help to raise funds for infrastructure projects, including power plants, to help sustain faster economic growth, Kwetey said. The government estimates it needs $2 billion a year to fund its infrastructure needs, he said.

“We have huge challenges in terms of the power sector,” Kwetey said. “If we want to have the kind of sustainable growth we’re looking for, we need to invest heavily in the energy sector.”

Economic growth will probably soar to 20 percent next year, from 5.7 percent in 2010, as Ghana begins oil production of about 120,000 barrels per day, Kwetey said. Oil is expected to earn the West African nation between $550 million and $800 million in revenues in the first year, he added.

Cocoa Purchases

Ghana is also close to agreeing a transaction with a group of banks to raise about $1.2 billion to pay for cocoa purchases this year, Kwetey said.

“The discussions are at the final stages,” the deputy minister said. “It shouldn’t be long. By the third quarter we’re likely to have something.”

Ghana signed a trade finance facility for the same amount with 29 international banks in September last year to pay farmers for purchases in the 2009-10 harvest. The country earns about 40 percent of its foreign exchange revenue from cocoa.

The government also secured a loan of $1.02 billion from the International Monetary Fund in July last year to help boost foreign currency reserves and ease the impact of the global crisis. The central bank cut its benchmark interest rate by 3.5 percentage points to 15 percent since November as inflation eased.