An adviser to the Ghanaian Ministry of Finance and Economic Planning has sought to cool rampant market speculation that the Republic of Ghana might borrow as much as $750 million when it debuts on the Eurobond market, possibly this year.
Such an issue would increase Ghana’s debt-to-GDP ratio by about five percentage points. However, Mark Starr, the US Treasury official seconded to Ghana to advise the government on debt management, told investors at a Standard & Poor’s/Standard Bank conference in London that the Ministry had so far only discussed a $500 million issue with the IMF. “That would appeal to bulge-bracket investors who are restricted to taking up 10% of any new issue, but are likely to want a $50 million allocation.”
Konrad Reuss, managing director in the sovereign ratings group at Standard & Poor’s, emphasised that even this smaller amount would need to be carefully scrutinised from a debt sustainability perspective. “Given administrative capacity constraints, it will be very important for the government to set out clearly how the funds will be spent, to ensure the borrowing is used productively.”
Nevertheless, Starr underlined that the Ghanaian government is committed to the Eurobond plan, given its large infrastructure financing needs, especially in the electricity sector, and the slow rate of official concessional loan disbursements. It is also possible that the size of Ghana’s funding requirement, rather than the need for a corporate sector benchmark, dictated the choice of a Eurobond, instead of a smaller syndicated loan deal that could most likely be accomplished at lower cost.