The Ghana government plans to issue a new five-year bond to raise GH¢500 million in August to help reorganise its debt, Finance Minister Mr Seth Terkper said on Tuesday.
The bonds would be available for investment through the Bank of Ghana (BoG), the appointed primary dealers and will be listed on the Ghana Stock Exchange.
Currently, short term debts account for about 42 per cent of the total domestic debt.
“It is our plan to gradually shift from the issuance of short-term instruments for capital expenditure to medium and longer-term debt issuance using the book runner system to extend maturities,” Mr Terpker told investors and the media at the launch.
The book building approach, compared to the auction process, involves more intensive engagement with the likely clientele for the medium to long-term instruments – institutional investors such as pension funds, insurance companies, mutual funds, provident funds and unit trusts.
The government has appointed Barclays, BoG, Stanbic Bank Ghana and Strategic African Securities as joint book runners to rally investors for the bond.
The book runners approach would be used for medium and long-term securities and would run on a pilot basis alongside the existing central bank auction system.
Mr Terpker explained that the book-building approach was designed to be complementary to the established BoG methods of issuance and not a replacement.
“The issuance of short-term instruments will continue through the weekly Bank of Ghana auction. Following a successful pilot, this approach will eventually be used for the medium to long-term issues,” he said.
“This is part of the debt management initiatives outlined in the Budget such as the Ghana Infrastructure Investment Fund, Sinking Fund, Ghana Exim, Escrow and on-lending,” Mr Terpker added.
Mr Terkper said a key objective of public debt management is to promote the development of an efficient primary and secondary domestic securities market that would provide benchmark rates for the entire economy and across maturity spectrum.
Dr Sam Mensah, a government advisor on securities, said the medium to long-term bonds would help in infrastructural development while the short-term issues could be used primarily to boost liquidity.