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Business News of Tuesday, 16 January 2018

Source: citibusinessnews.com

Changes in US interest rate structure to impact Eurobond


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The US’ decision to adjust its interest rates structure is likely to affect the coupon rate that Ghana may issue its Eurobond this year—that is a caution from economist Dr. Lord Mensah.

According to him, investors will weigh the benefit of giving their funds to Ghana as against investing in the US for better returns.

The Finance Minister, Ken Ofori-Atta during the presentation of the 2018 budget stated that Ghana may issue a Eurobond this year to make up for the budget deficit.

But speaking to Citi Business News, Dr. Mensah warned that Ghana may attract an interest rate higher than what was given by the investors in the country’s last Eurobond.

He explained that if the interest rate in the US was around 0.5 percent during the issuance of the last Eurobond, the coupon rate may change now as the interest is hovering around 2.5 percent.

“The US which is a safe haven for international borrowing is trying to restructure its interest rate. So every investor who will look at our bond as an alternative investment will like to demand higher. If previously we had our bond around 10.75 percent, at this time from the market I don’t think we will attract anything less than that,” he said.

Dr. Mensah was of the view that investors will always calculate the risk premium on their funds before investing.

“Looking at the current US interest rate structure hovering around 2.5 to 3.5 percent, if you add it to the 10.75, we should be doing almost 15 percent”.

He was of the view the view that such a coupon rate will be too costly for Ghana.

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