[ 2015-11-18 ]

Terkper plans $750m Eurobond next year
Finance Minster, Seth Terkper has hinted that
government will next year sell a $750 million
Eurobond to finance its budget deficit, as access
to non-concessional loans and donor flows begin to
dry up.

The Minister in presenting the 2016 budget to
parliament estimated next year’s budget deficit
to be about Ȼ8.4 billion, which will be
financed through both foreign and domestic
sources.

Following the decision of the central bank to
cease financing government’s deficit from next
year, government is looking to other sources of
financing.

According to the budget statement that the Finance
Minister tables before Parliament, Ghana will
issue a Ȼ3 billion sovereign bond (US$750
million), using an exchange rate of [Ȼ4=$1]
as part of external sources of financing the
deficit.

Next year's sovereign bond will be the fourth time
in as many years that government will be borrowing
from the Eurobond market, having issued $1billion
valued bonds in the last three years.

The last of the Eurobonds issued last month was
sold at an interest rate of 10.75 percent with a
maturity period of 15 years, the longest issued by
a country in sub- Saharan Africa outside South
Africa.

Despite announcing that bond 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.

Source - Bus & Fin Times

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