"Eurobond market the biggest disaster for Ghana, other emerging economies \u2013 Joe Jackson"

" Eurobond market the biggest disaster for Ghana, other emerging economies \u2013 Joe Jackson \r\n\r\nDirector of Operations at Dalex Finance, Joe Jackson, has described the Eurobond market as the single biggest disaster for Ghana\u2019s economy and other emerging economies in Africa.\r\n\r\nAccording to Mr Jackson, the availability of funds on the international debt market coupled with flexible rules on use of capital raised from the Eurobond market, has resulted in over-borrowing by emerging countries like Ghana.\r\n\r\n \u201cThe Eurobond market is the single biggest disaster to happen to emerging economies in Africa. \r\n\r\n \u201cBecause there was money available on the Eurobond market and there were no strict rules attached to the use of the funds, African countries borrowed and borrowed until they over-borrowed. \r\n\r\n \u201cIn Ghana\u2019s case, what did we use the money for? We used it for consumption, for nice things,\u201d he quipped speaking at the Economic Dialogue Series organised by Metro TV and monitored by norvanreports. \r\n\r\nGhana\u2019s Eurobonds issuance tripled from $4.5bn (GHS 36bn) in 2018 to $13.2bn (GHS 105.6bn) by the end of 2021 .\r\n\r\nThis is per a report brief by policy Think Tank, IMANI Africa on Ghana\u2019s recent return to the IMF.\r\n\r\nPer the report, Ghana\u2019s eurobond issuance is the third highest on the African continent following South Africa (2 nd \u00a0place) with $20.6bn in total eurobond issuance and Egypt (1 st place) with $37.5bn in total eurobond issuance.\r\n\r\nNigeria and Ivory Coast follows Ghana in 4 th \u00a0and 5 th places with total eurobond issuance of $10.7bn and $9.4bn respectively.\r\n\r\nThe $13.2bn Eurobond issuance, IMANI asserts in its report, forms 17.8% of Ghana\u2019s 2021 GDP.\r\n\r\nSouth Africa\u00a0was the first to issue Eurobonds in 1995.\r\n\r\nTo date, 21 African countries have sold Eurobonds worth a combined total of over\u00a0US$155 billion\u00a0on international bond markets\u00a0since 2006, when Seychelles become the second African country to join the Eurobond market.\r\n Eurobonds borrowing is done through commercial terms. The interest rates, term of bond and coupon payments are determined by market conditions. \r\nBecause of \u00a0poor credit ratings and\u00a0perceptions of high risk,\u00a0 African bonds are classified as high yields. They\u2019re risky, but they offer high returns. Investors are still scrambling for Africa\u2019s high yield bonds.\r\n\r\nEurobonds are costly for governments. The\u00a0 high yields demanded by investors means high-interest cost to governments . But they are attractive to governments because investors buy them without preconditions.\r\n\r\nUnlike multilateral concessionary loans that come with policy adjustment conditionalities, governments have total discretion in how to use the proceeds.\r\n\r\nThey are, however, offered at high interest rates, high coupon payments and shorter debt maturities. This means the government has a shorter period to use the costly funds and will also be paying periodic interest.\r\n\r\nThe average tenor\u00a0for Africa\u2019s bonds is 10 years,\u00a0 with interest of 5% to 16%.\r\n\r\nThis is unsustainable and has already led to more fiscal strain.\u00a0 Interest repayment is the\u00a0highest expenditure portion\u00a0and remains the fastest growth expenditure in sub-Saharan Africa\u2019s fiscal budgets. "

"Eurobond market the biggest disaster for Ghana, other emerging economies \u2013 Joe Jackson"

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