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Parliament approves Ghana's second sovereign bond
 
Posted on: 26-Jun-2013         Source: GNA
 
 
 
Parliament on Wednesday approved government’s move to issue a second sovereign bond (Eurobond) of up to one billion dollars on the international capital market to bridge the country’s infrastructural deficit and refinance its debts.

The 2013 Budget statement profiled initiatives aimed at fiscal consolidation and those proposals had a funding deficit of eight billion Ghana Cedis anticipated to be financed through borrowing and grants, thus necessitating the re-entry of the country into the international capital markets for alternative sources of funding capital projects at reasonable rates.

The Bond, which has a maturity period of seven to ten years, is subject to market conditions at the time of issue. Barclays Debt Capital and Citi Group will jointly manage the transaction, whilst EDC Stockbrokers and the Strategic African Securities would co-manage the deal.

About 284 million dollars of the Bond would be utilized on capital expenditures in the 2013 budget statement, whilst 103 million dollars would be used as counterpart funding for projects already approved.

An amount of 363 million dollars of the Bond would go to re-financing of maturing domestic debt to reduce cost of borrowing and a further 250 million dollars would be employed on partial and gradual redemption of the Ghana 2017 Eurobond.

According to the Report of the Finance Committee of Parliament the bond issue will cost the country some 2.1 million dollars as fees and expenses on transaction advisers.

Surprisingly, the debate on the issue on the floor of the House was not characterized by the acrimonious partisan banter associated with such transactions, as both sides considered critically the benefits of the arrangement.

The minority, however, insisted that the terms and conditions of the bond should be attached to the arrangement before the legislature approved the financial deal.

This was in reference to comments that were made by the Speaker of Parliament, Edward Doe Adjaho, the Majority Leader Benjamin Kunbuor and President John Dramani Mahama, who whiles members of the House on the minority side in the Fourth Parliament, insisted that the terms and conditions of the first Eurobond that was issued in 2007 be furnished before the House before legislative approval was given.

Thus Deputy Minority Leader Dominic Nitiwul asked that the request by government be withdrawn until such a time when those terms and conditions were brought before the House to be scrutinized.

But Speaker said he stood by the statement he made concerning the first Eurobond in the Fourth Parliament, maintaining that it was better for the House to grant the request because of various judgments emanating from the Supreme Court on some international business transaction.

He insisted that irrespective of whatever happens, government should furnish the House with the terms and conditions of the transaction and that the lawmakers should resolve to monitor the process diligently.

Finance Minister Seth Terkper assured the House that those concerns would be addressed and that government was bent on moving the country in the right direction by taking advantage of the international markets to fast-track the development needs of Ghana.

He was optimistic that the transaction would go well and that investors would show similar or more interest in the 2013 bond issue like the 2007 bond that was over-subscribed.

But some minority members held contrary views on the transaction, contending that it was imprudent to pursue that plan because it would only increase the country’ debt stock which currently stood at about GHȼ38.3 billion.

Dr Mark Assibey- Yeboah, Member for New Juaben South, said the issuance of the Eurobond will increase Ghana’s debt stock faster because the country would be drawing down on the long awaited China Development Bank loan “and our debt will just get bigger and bigger”.