A Senior lecturer at the University of Ghana Business School, Dr. Lord Mensah has argued that managers of the economy should have rejected the 9.25% rate offered by investors on Ghana’s fifth Eurobond.
The bond which was issued last Thursday (September 8, 2016), has been met with heavy criticisms from economists including Dr. Mahamoud Bawumia, a former Deputy Governor of the Bank of Ghana.
Ghana accepted 9.25 percent on its 5 year 750 million dollars Eurobond.
But speaking to Citi Business News, Dr. Lord Mensah urged government to slow down in its developmental drive as a way of attracting cheaper sources of funding.
“The longer period it takes, the less the obligation will be to satisfy…Infrastructural developments takes time. Now that the country is struggling because of debts, the authorities must be careful.”
The 5 years for maturity of the Eurobond is the shortest period in the history of Eurobond issues in Ghana and the principal will be expected to be repaid in three installments of US$250 million in September 2020, September 2021 and September 2022.
Government has been forced to put on hold issuing of this particular Eurobond a number of times because of unfavorable market conditions.
It was forced to put on hold the launch last month [August] after investors quoted interests much higher than government had expected.
Interest for the last Eurobond issued last year [October, 2015] which was backed by a World Bank guarantee of 400 million dollars was 10.75 percent, the highest attracted so far.
The high interest rates that were demanded by investors have been attributed to the country’s current economic challenges as well as high debt levels.
Proceeds from the Eurobond will be used to retire the first Eurobond which matures next year .
By: Norvan Acquah – Hayford/citibusinessnews.com/Ghana