Ghana to start marketing $1,5 billion eurobonds

Accra. – Ghana will start investor meetings by the end of next month as it seeks to sell its third Eurobond and plug a budget deficit that has helped make the cedi the world’s worst-performing currency this year. The government of the world’s second-biggest cocoa producer has completed a study on whether to go ahead with the offer of about $1,5 billion, Deputy Finance Minister Mona Quartey said in an interview in the capital, Accra, on Tuesday.

The Eurobond “money will basically be used for the budget programs,” Quartey said. “It will also help to stabilise the currency.”
The cedi slumped 35 percent this year in the world’s worst performance among global currencies tracked by Bloomberg, pushing inflation to 15 percent in June and prompting the central bank to raise its key rate to a 10-year high this month.

Ghanaian dollar debt returned 5 percent this year, the lowest in Africa and less than the average 9,3 percent return for emerging markets, according to Bloomberg indexes.

The success of Kenya’s $1,5 billion Eurobond sale last month and Ivory Coast’s $750 million issuance on July 16 shows there’s investor appetite for African debt, Angus Downie, head of economic research at Ecobank Transnational Inc. in London, said in response to e-mailed questions.
High Cost

“Ghana’s domestic policy and macro environment are a concern, which will likely lead investors to demand a high coupon if the bond is to sell,” he said. The amount Ghana is seeking to raise is too high, Downie said.

On July 16, Finance Minister Seth Terkper raised the 2014 budget deficit target to 8,8 percent of gross domestic product from a previous estimate of 8.5 percent as the nation increased spending by 3,2 billion cedis ($831 million).

Moody’s Investors Service cut Ghana’s credit rating one level last month, saying the fiscal gap may exceed 10 percent of GDP for a third year.
The possibility of seeking aid from the International Monetary Fund, as part of measures being looked at to steady the currency, was raised by former deputy central bank governor and opposition politician Mahamudu Bawumia in March.

While Quartey indicated in the interview that an IMF deal was still an option for Ghana, she said in a phone interview later today that “we are not considering an IMF loan at this time” and that the Eurobond sale is “part of a home-grown strategy to stabilise the cedi.” – Bloomberg.