Ghana plans bond auction this year

GHANA hopes to issue a seven-year government bond by the end of December, following the successful launch of three- and five-year notes earlier this year, Finance Minister Kwabena Duffuor said.Duffuor said that discussions were also held about the possibility of opening the short-term domestic bond market to residents to help shift government borrowing to the non-banking sector.Three and five-year bonds issued this year by the West African cocoa, gold and oil exporter were oversubscribed with keen participation from offshore investors.'Plans for issuing new longer-term bonds before the year ends are unfolding.'Obviously, issuing longer-term maturities will help reduce our risks and that means lowering our funding costs over time,' Duffuor told Media in an interview.Last week, the Bank of Ghana said that it sold 898.5 million cedis ($465.5 million) in bids for a five-year note that auctioned Thursday.The sale's average yield was 23 per cent compared to 26 per cent at a similar auction in June.Ghana had initially planned to sell just 300 million cedis at the auction, but decided to accept more bids because of the decline in the yield.Duffuor said that the additional bond proceeds would be used to refinance domestic debts to lengthen their maturity profile in line with the government's debt management strategy.'We inherited a huge debt profile but we are managing to get that out of the way,' Duffuor said .He added that the government had so far paid some 3.8 billion cedis in arrears since taking office in January 2009.He also said that the overwhelming subscription of the bond, issued as part of measures to shore-up the local cedi currency showed the revived investor confidence in the economy.The cedi lost about 20 per cent of its value against the dollar this year.'Our country's economic fundamental is very strong - investors are now bullish about the economy as we expand.'Despite double-digit producer price inflation and the slide of the cedi, consumer price inflation remains within the single-digit target band, rising slightly to 9.5 per cent in July.Duffuor said that he expected consumer inflation to dip in August but did not give figures.'This is the food harvest period and we expect inflation to go down on lower food prices and not go up as we've seen in the last few months,' he added.Ghana is preparing for presidential and parliamentary elections in December and there are fears of fiscal slippage as the government comes under demand pressures, especially from workers and constituencies.But Duffuor said that the government would stay within its targets, 'elections or not', adding that implementation of a new salary package for public sector workers would be completed by the end of September.He added that the fiscal programme of the government was not distorted because of higher revenue flows from other areas such as tax collection and excess proceeds from bonds.
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