Ghana raises $3b Eurobond
A statement issued in Accra by the Finance Ministry said the successful issue of the bond was a vote of confidence of global investors in the country’s fiscal plans and revitalization strategy.
It said the country’s consistent ability to raise multi-billion-dollar financing and the pioneering use of a 4-Year Zero tranche was a testament to its hard-won credibility with investors, strong growth prospects and disciplined fiscal consolidation efforts in 2020.
Ghana is the first Emerging Market Sovereign to add a zero-coupon bullet tranche to its bond financing portfolio.
This is significant as it enables the Government to create fiscal space to build the economy back better.
A zero-coupon bond was a bond that does not make periodic interest payments during the tenor of the bond but is sold at a discount to its value at maturity.
Commenting, Mr Ken Ofori-Atta, the Finance Minister said the historic bond issuance is a strong signal that investors have confidence in our plan for debt sustainability, economic recovery and growth and that Ghana remains a Pillar of Stability”.
He said part of the proceeds would be used for domestic liability management.
“For example, using $400m of the zero-coupon bond to refinance domestic debt with an average interest rate of 19% will net Ghana savings of some $200 million over the four years,” Mr Ofori-Atta explained.
The proceeds will, alongside conducting liability management, also support the budget deficit by funding growth-oriented expenditures.
The statement said despite the looming risk of a possible third wave of COVID-19 infections across Europe, generally more volatile market conditions, and global trade disruptions from the Suez Canal blockage, Ghana saw strong demand for its sovereign bond offering, which peaked at over $6 billion.
The bond issuance comes after a series of fixed-income virtual meetings held locally across three days with Investors from the United States, United Kingdom, Europe, Middle East and Asia.
The transaction comprised $525million 4-Year Zero Coupon, $1 billion 7-year Weighted Average Life (WAL), $1 billion 12-year WAL and $ 500 million 20-year WAL.
The traditional Eurobonds were priced at 7.75 per cent, 8.625 per cent and 8.875 per cent, respectively.
The statement said the 20-Year Tranche, which priced at 8.875 per cent was also expected to fill a gap in Ghana’s yield curve, ensuring that Ghana now had a well-defined yield curve with issuances across the curve from 4 years to 41 years.
It said Ghana was projected to maintain positive economic growth of 0.9n per cent in 2020, representing one of the few “pockets of resilience” on the continent.
In 2021 and over the medium term, the Government expects GDP growth to average 5 per cent and the deficit to decline to under 5 per cent by 2024 ensuring debt sustainability.
The statement said this would be achieved through the GH¢100 billion Ghana CARES programme that would provide the fiscal stimulus to drive growth and economic transformation.
It said Government has committed to implementing comprehensive measures including the introduction of e-taxation to increase domestic resource mobilization and the deployment of digital platforms to engage local communities in the oversight of public spending.
It said Government was also committed to efforts to strengthen tax administration systems to identify, track and stem illicit financial flows.
Ghana successfully raised $2 Billion in 2018, $3 Billion in 2019 and $3 Billion in 2020.
The successful bond issuance should boost business confidence as the Government looks to stimulate the economy and increase revenue through what it calls “burden-sharing” for “enhanced profit sharing.”