The government is planning to raise an Eurobond in the first quarter of 2020. The 2020 budget captured the intention of the government to go to international sources to borrow. According to the budget statement, needed infrastructural developments necessitates the need for the fund. The government is expected to raise US$3 billion in this offer. Details of the bond in terms of pricing and period of the offer are yet to be known.
THE 20-YR BOND
Earlier in August 2019, the government raised its first 20-year bond on the market. It was under subscribed which raised concerns about investor confidence. The offer could only raise GH¢162.1 million ($30 million) of opposed to the targeted GH¢450 million. Analyst also believe Ghana is paying too much in returns to investors at 20.2% per annum. This depicts a higher risk rating. The yield of 20.2% was still not enough to excite investors. This campaign would be led by the Minister of Finance, Mr. Ken Ofori Atta and supported by the Governor of the Bank of Ghana, Dr. Ernest Addison.
DEPLOYMENT OF FUNDS
Apart from infrastructural developments, another objective of the Eurobond is for the management of debt and the stabilization of the local currency that is under the incessant pressure of depreciation to the major currencies especially the US Dollar. As at December 2019, the Ghana cedi had depreciated by 13% (Bloomberg) in 2019. The targeted Eurobond would be provide hedge for the perennial slide of the Cedi at least at the beginning of the year.
FEARS FOR THE BOND
Considering the performance of the earlier 20-year bond, there are fears that the upcoming bond may not do as well. At a time when IMF has hinted of their concerns of the mounting debts of the nation, investor confidence may be affected negatively. The negativity could culminate in investors shunning the first Eurobond 2020 offer or demanding higher yields. It is most likely the yields on this bond will be higher. Also being an election year when government spending experiences a free fall, analysts are of the view the funds could be misapplied for funding of political campaigns.
