The Minister of Finance, Mr Seth Terkper, says the government is ‘re-calibrating the economy’ to safeguard it from borrowing costs.
“We will not borrow at any cost or access funding that does not satisfy Ghana's overall strategic economic objectives," he said.
He explained that the decision was informed by the government's focus on re-positioning the economy for sustainable growth and implementing a comprehensive debt management strategy in line with the fiscal consolidation objective. Mr Terkper disclosed this to the Daily Graphic on the sidelines of the ongoing World Bank/International Monetary Fund (IMF) Spring Meetings in Washington, DC, United States of America (USA).
This month, Ghana successfully concluded a four-day non-deal roadshow (NDR) to London, Boston and New York, meeting over 70 international accounts who have invested in the country’s dollar and cedi denominated bonds.
Roadshow
The April Roadshow, which has been part of Ghana’s regular investor outreach efforts for the last three years, was led by Mr Terpker.
Other members of the delegation were a Deputy Minister of Finance, Mr Cassiel Ato Forson, and senior officials of the Ministry of Finance and the central bank.
It is a regular feature for countries to meet their major investors and woo possible new ones with an update on recent developments in the country and the prospects ahead. It is not a roadshow for investors to buy sovereign debts, which is a deal roadshow.
The NDR seeks to build confidence in the investor community and provides a unique opportunity for investors to get first-hand information on what may be of issue to them.
Update
The minister said the delegation gave investors an update on progress made with re-setting the economy on a stronger trajectory for better performance, effectively addressed perceived risks in the economy and provided insights into the government's efforts to boost inclusive and diversified growth
"Investors appreciated Ghana for the consistency of its investor outreach efforts, transparency and availability of data, progress made, as well as sound and detailed plans for the economy which put to rest worries over Ghana and encourage further investments," Mr Terkper said.
Eurobond
Ghana issued the first Eurobond in September 2007 to raise $750 million for a 10-year tenor at a coupon rate of 8.5 per cent. It was oversubscribed with a book value of almost US$3 billion.
The Second Eurobond was issued in 2013 for $1 billion, of which the proceeds were used mainly to re-finance the 2007 Eurobond. It was a 10-year bond with coupon rate of eight per cent. It was oversubscribed to the tune of US$2.2 billion.
Another was issued in 2014, during which $1 billion was raised with a payment period of 12 years and a coupon rate of 8.125 per cent. The proceeds were used for capital expenditure and also as seed capital for the Ghana Infrastructure Investment Fund.
The last issue was last year when the government raised $1 billion for a 15-year tenor, at a coupon rate of 10.75 per cent.
Ghana is the second country in sub-Saharan Africa to have issued a bond of that long tenor. It was oversubscribed to the tune of US$2 billion. The proceeds of that issue were used solely to re-finance existing domestic debts.
Oil price
On the issue of dealing with the fiscal impact of declining world crude oil prices, using the methodology prescribed in the Petroleum Revenue Management Act, 2011 (Act 815), Mr Terkper said the Benchmark Revenue Price for the 2016 fiscal year was estimated at $86.02 per barrel.
However, with the passage of the Petroleum Revenue Management (Amendment) Act, 2015 (Act 893), the revised Benchmark Price based on prevailing market conditions at the time was $53.05 per barrel, consistent with the 2016 average crude oil price projected at the time by the traditional sources of Brent crude pricing data.
"With the continuous decline in crude oil prices, it is estimated that prices are likely to average between US$35 and US$50 per barrel in 2016, lower than the average of US$53.05 used for the 2016 Budget. This was expected to have negative implications for budget execution.
"However, the current developments are pointing to a gradual recovery of crude oil prices. Despite this development, the required adjustments have already commenced, with monthly and quarterly budget allotments to ministries, departments and agencies (MDAs) reflecting the receipts from current liftings.
"Based on a similar process undertaken last year, the delegation was confident that this will not derail our fiscal consolidation objectives," Mr Terkper said.
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