Ghana Aims 50-year bond Issue

Ghana aims to issue longer-dated hard currency bonds in its next bond sale, Finance Minister Ken Ofori-Atta said on Wednesday, adding that he expected the cedi currency to strengthen in the months to come.

Ofori-Atta also said he expected to get confirmation from the International Monetary Fund that Ghana has successfully completed its programme with the lender.
He also confirmed that Ghana had no plan to extend its cooperation with the Fund beyond its annual Article 4 reviews.

The world’s second-largest cocoa producer has just completed a $3 billion bond sale with maturities of seven, 12 and 31 years. The order books had exceeded $21 billion – the highest ever for a sub-Saharan African bond sale – and nearly half of that was for the longest-dated issue, according to the finance ministry.

“We had a clear indication from investors that they are very interested in our longer-dated maturities,” Ofori-Atta told Reuters following an investor roadshow.

“We need longer-term financing for our infrastructure needs..and we will naturally keep extending the curve,” he said, adding that he had been approached by a number of investors about issuing a 50-year bond.

President Nana Akufo-Addo said in September that Ghana could issue a 100-year $50 billion bond as part of a long-term industrialisation plan, although analysts expressed doubt that Ghana had the capacity to undertake such a transaction.

Ofori-Atta said that he did not expect to come back to the market in 2019 and that a 2020 bond sale would have to be timed to take into account a general election scheduled for next year.

However, the finance ministry was keen to return to markets to raise funds and also for liability management, which accounted for a third of the bonds sold this week.
According to the IMF, Ghana is at high risk of external debt distress and had a debt-to-GDP ratio of 67.1 percent in 2018.

Ofori-Atta also said he hoped to shift the ratio of sovereign cedi to hard-currency debt from the current 55/45 percent to 50-50 in order to reduce the pressure of debt-servicing costs.
“It’s the domestic bonds which are the real culprit here,” he said, adding debt-servicing costs would continue to rise but at a slower pace.

Cedi sovereign bonds maturing in 2026 currently yield 20.1 percent, while the seven year dollar-bond sold on Wednesday has a coupon of 7.875 percent.

Ofori-Atta pointed to a mix of factors for the recent falls in the cedi, one of the world’s weakest-performing currencies in 2019. He cited the prospect of Ghana exiting its IMF programme unsettling markets, technical issues at the central bank and policymakers intervening less to preserve reserves.
But he said a turnaround was underway.

“It could strengthen a bit more,” he said. “There’s still a certain amount of weakness in our current account structure, we are too dependent on imports, and we need to put policies in place that drive up exports, and then we will find the real value of the currency.”
Ghana, which also exports gold and oil, is in the final year of a $918 million IMF credit programme which is due to expire on April 4.

The cedi lost as much as 18 percent of its value since the start of the year in mid-March before clawing back some of its losses. It is currently down 11 percent.
Some analysts have blamed a surprise central bank rate cut to 16 percent from 17 percent in January for the weakness.

Ofori-Atta said that in his view rates should stay where they are when policymakers meet next week.
“So much has gone on with regards to the bond flotation, exciting the IMF. For me, I would say let’s leave it as is, let’s all absorb these new variables and see what we can do.”

Credit: Reuters
(Reporting by Karin Strohecker; Editing by Hugh Lawson)

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