 |
|
|
|
 |
|
|
INVESTOR CONFIDENCE SOARS |
The yield on the Ghana Eurobond maturing in 2017, a benchmark for
African frontier markets, fell as low as 6.36% last week, a record since
its issuance with an 8.5% coupon rate in September 2007.
The
new level of the yield carried in an Ecobank African Debt Market Update
last week, justifies government's plans to venture into the
international capital market for the second time to borrow.
The
report points out that the finances of most African countries are
improving, as against those of developed countries that are
deteriorating. Ghana ranked among the best performers in terms of
accompanying indicators and economic prospects.
According to the
researchers at Ecobank Development Corporation, the research and
brokerage arm of Ecobank, the bond which has 40 percent placed to U.S.
investors, 36 percent with UK investors and the rest in Europe,
underscores the rising confidence of the international investor
community in the local economy which in a few months time is to become
an oil producer.
As of last year, Standard and Poor's and Fitch,
both sovereign credit rating institutions had rated Ghana B+ Negative,
with the note that the rating might improve once the West African
country's new programme with the International Monetary Fund (IMF) gains
ground and the country begins to make revenue from oil.
The IMF
has recently said that Ghana's gross domestic product (GDP) is
underestimated. The Fund, which has since been collaborating with the
Ministry of Finance and Economic Planning and the Ghana Statistical
Service to correct the anomaly in national accounting, thinks Ghana's
economy should be worth not less than US$35 billion as against the
current estimate of US$18 billion.
When officially concluded,
the bigger GDP position should enable the West African nation to borrow
more from the capital market, be it donor or the private capital market.
At the budget ceiling of 60% of GDP, Ghana's total public debt
position of US$9.2 billion as of December 2009 - made up of US$4.2
billion domestic debt and US$5.0 billion foreign debt - is not adverse.
The total debt translates into 51.7% of GDP, below the budget ceiling.
A
bigger GDP therefore would increase the room for the Ghanaian economy
to borrow more, as per the budget ceiling to undertake development
projects.
Comments from the local office of the World Bank last
week advised the nation to tie any interest in venturing into the
international capital market with productive investments ventures at
home that can pay back on their own.
Inflation and interest rates
have seen consistent declines recently, raising consumer and investor
confidence in the local economy.
In the last, two years,
government has been pursuing spending reforms that promote growth as
well as stability.
The latest year-on-year decline in inflation
recorded in April was the 10th straight monthly decline.
The
benchmark 91-day Treasury bill rate declined from a two-year peak of
25.8% in October last year to 13.12 currently.
The Ecobank
African Market Research pointed out that the trends in Ghana's bonds
tell a totally different story from more established emerging markets.
"The
extra yield that investors demand on emerging ¬market bonds has widened
over the last few weeks, closing at 3.30% - the highest level in three
months. The average yield on emerging market bonds has rallied to exceed
6.50% from a record low of 6.15% on April 15,” the report stated.
According
to the report, the Ghana Cedi has recorded a year-to-date appreciation
of 0.83% against the US Dollar – making it the most stable currency in
the African region so far. All other African currencies depreciated
against the US Dollar or recorded insignificant appreciations in
comparison to the cedi.
Source: B&FT |
|
|
 |
|
|
|
 |
