US$2.2 bn debt sale boosts central bank reserves by a third

The government has raised US$2.2 billion from a sale of long-dated domestic bonds on Friday, boosting its central bank reserves by a third, the Finance Ministry said on Monday.

A Finance Ministry statement issued in Accra said it successfully issued 15 and 7 year bonds with the same coupon of 19.75%, raising a total amount of USD1.13 billion.

In addition, the Ministry of Finance raised the cedi equivalent of USD1.12 billion in 5 and 10 year bonds via a tap-in arrangement.

These activities raised a total of USD2.25 billion and resulted in the lengthening of the maturity profile of the instruments available on the domestic market.

This issuance represents the largest amount issued by a sub-Saharan African country in a day.

The pricing obtained was also consistent with the initial price range of 18.95% - 19.85%. The issuance attracted a number of global portfolio investors including a very substantial investment in the 15-year bond by a very well respected global financial investor.

The Minister of Finance, Ken Ofori-Atta, stated that the issuance proceeds will be used to repurchase and/or retire a portion of the higher coupon short-term public debt instruments, meaning there will not be an overall increase in the total debt stock. This is in line with our liability management strategy which seeks to re-profile our public debt stock, extend tenors, reduce short term rollover pressures, and lower domestic interest cost. Additionally, this issuance will further help improve our foreign exchange reserves by over USD2 billion and further support the cedi.

This successful bond issuance and the significant amount raised, especially the longer tenor 15 year, is an indication of the strong appetite for Ghana Bonds due to the markets renewed confidence in the long term prospects of the economy and a major vote of confidence in the new government’s economic policies, fiscal measures and programmes as outlined in the 2017 Budget.

Also, on Friday the Parliament of Ghana passed the Appropriation Bill for the 2017 budget, including the landmark re-alignment of statutory funds which frees up about GHS4.5 billion in fiscal space for 2017.

The Ministry of Finance is pleased by the success of this bond offer. “..this is an indication of the markets’ belief in our commitment to building an effective public financial management system, improve the country’s debt sustainability outlook and mitigate the crowding out of the private sector. It is imperative that we re-profile our total debt stock of USD30 billion which should help put us on a path of ‘Ghana beyond Aid’, Ken Ofori-Atta added.