The rate at which we lend, its about London Interbank Offered Rate (LIBOR) plus basis point of 60, which is much lower than what you (Ghana) have been able to raise (through the Eurobond)."
President of the the African Development Bank has revealed that his financial institution could have given Ghana a better deal on the Ghana's last Eurobond issue.
In an interview with Graphic the president addressed Ghana's September Eurobond issue, Dr. Akinwumi Adesin said " Ghana could have gotten a better deal. The African Development Bank gives two types of supports to our countries. We have the Africa Development Fund (ADF), which is the concessionary arm of the bank. We also have the Africa Development Bank (ADB) which is the commercial side of the bank."
He added "Obviously, if you look at the rate at which we lend, its about London Interbank Offered Rate (LIBOR) plus basis point of 60, which is much lower than what you (Ghana) have been able to raise (through the Eurobond)."
The government of Ghana was on the Eurobond capital market in September to raise a total of $1.5 billion. This was to retire maturing debt and restructure other short term debt.
The finance minister expectation of an interest rate of 9 % notwithstanding, foreign investors want to part away with their money to Ghana only at a rate of 11 percent. Subsequent negotiations saw Ghana settle for a 10.75 percent interest and a total sum of $1 billion dollars.
The AFDB president however mentioned that arrangements are far advanced for Ghana to get access to relatively cheaper credit from the Bank.
However, Ghana is just at the preparatory stage of being certified to be able to borrow from the AfDB window.
"So, its a timing issue but going forward, once the criteria for qualification is met, Ghana would be able to borrow from that facility and at much more lower rates than the current situation.
But you know, if you have a patient and you have to first prevent a cardiac arrest, even if it is going to stabilise the situation, then you can expect these."
That not said, I think the right things are being done to solve the issue and I'm sure Ghana will come out of it.
He expressed optimism that Ghana will meet the criteria for financing.
I think Ghana is one of three countries that will very likely meet those set of criteria.
They are three issues that we are working with the government on and I expect that in the next few months, all that should be straightened up and Ghana should be in the position to borrow from that.
But generally, AfDB is very supportive of Ghana. I think the economy is very well run, the prospects are very bright, the investments made in Ghana will pay off and those made in infrastructure are already reducing the cost of doing business.
Meanwhile, in an earlier interview with Graphic Business, Dr. Akinwumi Adesin then waded into discussions about Ghana's current energy crisis and how the AfDB is going to help.
I think there are a number of things that need to be focused on.
First, is the issue of energy and I am happy that the President is focusing a lot on that.
All the investments made in the energy sector should allow Ghana to have about 4,000 megawatts (MW) of power in the next few years. With that Ghana would have more than it needs, given its average consumption of about 2,000 MW. That means there will be an average of 2,000 MW that can be sold.
So, the AfDB is going to be helping with others to create what we can from the West Africa Power Exchange so that Ghana's excess can be sold to neighbours.
The second concern was on the economy.
The second thing is for the government to continue to strengthen the macroeconomic environment and also have fiscal consolidation and I am very pleased with what the Minister of Finance is doing in that direction.
I think the president should be supported because it is very important to deepen these ongoing reforms. The third area is to diversify the economy,
and in that the country requires two major things; diversify into agriculture via agro and allied industrial development and establish industries.
I think trade, technology, logistics and finance are areas that this economy can be very well placed in. With that I was very delighted when the president told me that he wanted to set up Ghana to be the Rotterdam of Africa, where when it comes to the issue of the distribution of fuel, people can use Ghana’s ports to transport their products across.
So, agriculture and services, If you get these right, everything will fall in place.
The AfDB boss then further revealed exactly how much the Bank is planning to invest into the energy sector in Ghana.
Solving the energy challenge in Africa will require US$55 billion every year. That is much more than what the AfDB can do and that's why we are forming this transformative partnership on energy.
The private and public sectors would have to play significant roles. Of course, the AfDB would also have to play a big role. But I am not bothered at all at the cost it takes to solve that problem because I know the money is there.
Two things would have to work; the first is, the countries would have to increase investments. If you take the amount of revenues that Africa generates every year, it’s about US$540 billion every year. If Africa devotes 10 per cent of that to energy, the problem would be solved completely.
Secondly, most people who want to invest in the energy sector are private people and they are asking the question: how do I get a bankable project?
That's why the AfDB created the Africa50 Project, a new platform to deliver on infrastructure for Africa. That one has a Project Development Company (PDC) and Project Finance Company (PFC).