The $3 billion Eurobond cash has finally hit Bank of Ghana’s accounts after the Finance Ministry closed the fundraising exercise in the last week of March.
JoyBusiness is learning that the funds “came through” on April 7, however we cannot independently establish whether the necessary transaction cost of the lead managers was taken out before the transfer.
The funds are coming after the Ministry finance, together with the Bank of Ghana officials led a three-day virtual roadshow to engage investors from UK, Europe, Middle East and Asia in the last week of March 2021.
Breakdown of the Eurobond funds
According to a statement from the Ministry of Finance, post-Eurobond issuance, the funds was raised in four tranches.
The transaction comprised $525 million from the four-year zero $1 billion for the 7-year paper with a coupon rate of 7.75 per cent.
The 12-year bond will have a coupon rate of 8.62 per cent. The 20-year paper will have a coupon rate of 8.75 per cent.
According to the Finance Ministry, the 20-year tranche is expected to fill the gap in Ghana’s yield curve, which will ensure that Ghana now has a well-defined yield curve with issuance across the curve from four years to 41 years.
Based on the Eurobond prospectus, about $1.5 billion will go finance some projects identified in the budget, while the remaining going into liquidity management, payment of debts that are maturing and buying back some of the expensive Eurobond that raised previous years or what managers have described as government buyback strategy
Disbursement of Eurobond Funds
Sources say the necessary communications had been sent to the Ministry of Finance and the Controller and Accountant Generals Department (CAGD)for the necessary transfers to commence.
Some of these transfers will go to those specific budget projects accounts that the Finance Ministry and CAGD will be making the draw downs. The rest will be advanced to those debt serving accounts and liquidity management as well.
However, JoyBusiness is learning that disbursement will be done when the funds are “really needed” for the respective projects being financed.
According to persons with knowledge of these disbursements measures in place to ensure that there is value for money.
Concerns and impact of Eurobond on economy and cedi
The Funds coming in on time is expected to help government finance some of the critical initiatives, programs and projects identified in the 2021 budget.
It will also help managers of the economy quickly kick start paying off some of the debts that maturing as any delays may not be good for government, especially for those loans that are denominated in dollars, if the Ghana cedi is not firmly stable.
These funds hitting the Bank of Ghana’s account could also stabilise the Ghana cedis. This is because it could indicate that the Central Bank maybe be in a position to support the local currency with these dollars.
However, on the flip side, there are those that are worried about the impact of this funds on Ghana rising debt stock. That’s if these Funds are not invested in projects that can quickly pay back on time.
Data from the Bank of Ghana put Ghana’s total debt stock ending December 2020 at ¢291.6 billion.
The World Bank in its latest Economic Update report raised concerns about Ghana external debt stock. The Bank was worried about the fact Ghana could flip into the Debt Distress country because of this challenge.
The Eurobond Results
Government sources are, however, rejecting reports that the Eurobond was undersubscribed. According to them, it was in their plan to just take $3 billion, with the remaining dependent on market conditions. It said it had more than $6 billion worth of bids from investors.
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