Economist, Dr. Eric Osei-Assibey has cautioned government to get the country’s macroeconomic fundamentals in check before it hits the emerging markets for a $750 million bond at a favourable yield.
Finance Minister, Mr. Seth Terkper indicated to Citi Business News that Ghana was considering emerging markets to raise its next Eurobond due to shockwaves that have followed Britain’s exit from the European Union.
Mr. Terkper was optimistic Ghana could raise its next bond from emerging markets such a Brazil, China and India at a good rate considering the flow of capital investment into such economies in recent times.
But speaking to Citi Business News ,Dr. Osei-Assibey warned that even though the move is good in diversifying government’s financing, investors everywhere are careful of speculative economies and will demand high interest rates when there are downsize risks.
According to him, most emerging markets have funds to spare but will pay attention to risks and economic stability of the area of investment to guarantee some good returns.
“In markets such as the emerging markets if your economic fundamentals are weak and you are not able to manage your debt sustainable level you can be punished by them. They will demand high interest rates,” he warned.
He was of the view that even though the emerging markets may not be different from the traditional European markets, capital flow between the markets due to trade will cause some European investors to move to the emerging markets to participate in the bond.
“Investors are always looking for opportunities to maximize their investment so if the fundamentals are good they will come there to invest. Now there is no barrier to investment,” he said.
He stated that it is pertinent for Ghana to focus on the term of the cost structure and not just the cost.
“For me I think the emphasis should rather be on the term structure. Our focus should be on the terms. We must look out for long term investment like fifteen years, thirty years and above, ” he stressed.
According to him, with a long term structure government can get some space to invest the funds prudently to refinance the loan.
Touching on how long the Brexit effect will have on the European market to clear the way for government, Dr. Osei-Assibey stated that it is prudent for Ghana to test other markets to maximize its output.
By: Lawrence Segebfia/citibusinessnews.com/Ghana