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Business News of Thursday, 23 November 2006

Source: GNA

ADB to issue bonds in Ghanaian Cedis

Accra, Nov. 23, GNA -In response to increasing needs of funding projects in local currency, the African Development Bank (AfDB) is proposing to issue and list Ghanaian Cedi denominated bonds on the Ghana Stock Exchange next year.

The aim is to use proceeds to finance commercially viable private sector or non-guaranteed public projects in the country with financial needs starting from three million dollars.

Briefing journalists on the Bank's African Local Currency Initiative, Mr Stefan Nalletamby, Treasurer of the AfDB, said the bonds would be issued next year once a viable project, which is run purely on business lines was identified.

He said the bonds would provide long-term local currency financing to support development projects trough direct project lending or lines of credits to financial institutions and helped eliminate foreign exchange risk.

Besides the listing of the bonds are expected to have ripple effects on the local capital market, build the capacity relating to regulatory trading and settlement infrastructure in line with international best practice and eliminate currency risk exposure for borrowers.

"The transaction is also expected to impact positively on capital allocation and pricing, enhance financial sector asset and liability management by providing longer dated securities," Mr Nalletamby said. The AfDB officials are in the country to hold discussions with local banks and various discount houses, which have the expertise to play facilitating roles in the process.

Mr Yaw Adu Kuffour, Senior Financial Analyst with the Bank said, the African Local Currency Initiative aimed to raise medium to long-term capital in the currencies of regional member countries to fund the bank's operations in these local currencies.

This is because local cost of projects is increasingly becoming a significant component of overall project cost.

He said the bonds would also give more investment avenue to pension funds, insurance companies among others to invest long-term to finance their future needs.

The bank is adopting a two-pronged approach of issuing debt either in the domestic debt market of member countries or in the Eurobond market.

In October this year, the AfDB became the first supranational borrower to issue a two-year bond worth about 45 million dollars (equivalent of 414.9 billion cedis) linked to the Ghanaian Cedi. Other experiences on the continent were with South Africa, Botswana and Tanzania.