Ghana goes to the Eurobond market again in 2016

Analysis of expenditure and revenue projections for 2016 reveal a projected budget deficit of 8.5 billion Ghana Cedis, about 2.5 billion dollar.

Minister of Finance, Seth Terkper has revealed plans to go on the Eurobond market yet again to raise non-concessionary funding  of $750 million.

Finance Minister Terkper said government plans to finance the deficit with funds from the domestic and international markets to finance the deficit.

Again, the Eurobond market has become a more viable source of finance for government over the past decade because of fast falling donor funds and cheaper credit from the IMF.

However, it is clear that government's increased frequency to the Eurobond market has been precipitated by the restrictions on the Bank of Ghana by the IMF in terms how the bank can finance government's deficit.

Analysts are keeping a keen eye on the finance minister and the Central Bank as they plan to issue this fourth Eurobond in four years given the high rates Ghana got in its last $1 billion Eurobond. Financial analysts criticised the government for walking away with a 10.75 percent interest rate.

Just like most of the last Eurobonds government has issued in the past four years, the $750 million

Despite announcing that  the bonds will be used to finance capital projects, the minister said the entire funds will be used to refinance maturing domestic debts.

The minister, speaking at a press conference on the use of the 2015 bond said: "We are going to use the bond to refinance 3-year and 90-day T-bills. It will benefit us if we discuss whether it is more prudent, even at 10 percent, to refinance the 3-year bond which is

due for example in two weeks' time; or whether it would have been better to refinance it domestically at 27 percent - increasing domestic interest rates and crowding out private capital," he said.

Deficit financing

According to Mr. Terkper, next year's budget deficit is expected to decline to 5.3 percent of GDP as against a projected figure of 7.3 percent for this year.

Financing for this year's deficit will be drawn from domestic sources at Ȼ5.4 billion, with the external sources making up the remainder of Ȼ3.4 billion.


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