Investors considering participation in Ghana’s upcoming bond issuance today could earn interest rates of up to 10 percent, according to finance and tax analyst Nelson Cudjoe Kuagbedzi.
Speaking to Citi Business News, Mr. Kuagbedzi explained that the projected rate reflects prevailing market conditions and government efforts to balance the need to attract investors while keeping borrowing costs sustainable.
The planned bond sale is expected to be Ghana’s first major return to the domestic bond market following the restructuring of government debt under the Domestic Debt Exchange Programme.
Mr. Kuagbedzi noted that the issuance is likely to play an important role in rebuilding investor confidence in the local capital market while also helping the government extend the maturity profile of its debt.
“We also expect this new issue wants to actually restore some level of investor confidence in the Ghanaian capital market. And finally, this is also going to help in extending the maturity profile of government debt,” he said.
He explained that the government’s heavy reliance on short-term Treasury bills exposes the country to refinancing risks, which could place pressure on public finances.
“I mean, if you are relying on Treasury Bill, there are inherent reinvestment or refinancing risks in there. And so once the maturity profile of this debt is enhanced, government can have the fiscal space to do whatever they want to do,” he stated.
According to the analyst, interest rates on the new bonds are unlikely to exceed the 10 percent mark due to improving macroeconomic conditions.
“However, I don’t foresee the rates going beyond 10 percent. This is because the macro fundamentals are doing very well. Even the DDEP bonds hover around 10 percent,” he explained.
“And so we are projecting that the new bonds that the government will issue will not go beyond 10 percent. In any case, inflation is even below 4 percent. And so we expect the new bonds to hover around 10 percent when it is finally issued.”
