Bonds issued by Ghana on the money market are failing rally alongside those issued by fellow African countries as a result of what investors’ estimate as high risk to do business in the country at the moment.
Consequently, investors are only prepared to send their money the way of Ghana if the yields are high.
As Finance Minister, Ken Ofori-Atta, continues to push the country’s debt liabilities with more borrowing, the risk profile of Ghana has ensured that the country’s three-year and longer-dated local bond yields have risen astronomically on the secondary market compared to other African countries.
Bloomberg reports, for example, that yields on the 849 million-cedi ($146 million) three-year bond issued in April have climbed to 19.2% after falling to a low of 18.7% on Aug. 19.
Over the same period yields on Nigeria’s 859 million-naira ($2.3 million), 2023 notes declined to 2.7% from 5.5%.
Five-year notes Ghana sold in June have climbed to 20.5% from 19.8% while similar maturity papers in Nigeria eased to 3.1% from 6.4% over the same period, Bloomberg reports.
Generally, bonds issued by African countries have been performing well, except those that are issued by Ghana.
Bloomberg’s AFMI Africa bond index, which tracks the performance of local-currency bonds of key economies rallied to 10.2% on Monday from 10.9% at the end of August and a peak of 13.4% in March when the coronavirus pandemic struck the continent.
Meanwhile, the country’s budget deficit has been spiralling out of control as its debt to GDP ratio goes through the roof, at 76.7% in a development that has led experts to conclude Ghana is on the very cusp of HIPC if not already a HIPC country.
Ghana, the second-largest economy in West Africa after Nigeria, raised its budget deficit target for 2020 to 11.4% of gross domestic product in its mid-year budget review in July from an initial forecast of 4.7%.,Finance Minister, Ken Ofori-Atta has blamed the coronavirus for the revision.
According to Bloomberg, the government’s likelihood to undertake massive projects to woo votes is likely to see the actual deficit rise to 12.5% of GDP.
“Ghana’s fiscal deficit is likely to be among the highest on the continent but what really singles it out is the high interest-cost to government revenue ratio,” Mark Bohlund, a senior credit analyst at REDD Intelligence, is quoted as saying.
In the first half of the year, Ghana clawed in revenue and grants amounting to Ghc22billion. Interest payments in the same period was GHC11.6 billion.
Meanwhile, public debt expanded to 20.6% in the first seven months of 2020, faster than 18.6% last year.