Finance Ministry raises GHS 923m from 5-year bond at 21% interest rate
A total of GHS 923.79 million has been raised by the Ministry of Finance in the auction of a 5-year maturity dated bond on the domestic capital market.
Auctioning results made available by the Bank of Ghana [BoG] indicates that, the 5-year bond was auctioned at an interest rate of 21 percent per annum – 0.5% above the initial pricing guidance of 20.50%.
The Ministry in the auction of the medium-term debt instrument accepted all the bids of GSH 923.79 million from the investors.
The high interest rate on the bond comes on the back of concerns raised investors about the fiscal outlook of the Ghanaian economy which is characterized by rising debt, arrears and fiscal deficits.
However, the amount raised through the issuance of the 5-year bond exceeded the targeted amount set for the initial 7-year bond indicative that government exceeded its calendar target.
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In recent times, investors have been demanding higher yield on Ghana’s bonds because of the perceived risks in the economy.
This has increased the interest rate of the maturity periods of the bond.
Analysts say both the domestic and external markets have tighten in recent times as global liquidity continues to dry up. Coupled with the fiscal challenges, this is being reflected in higher yields on the market.
Similarly, Central Banks of advanced economies have begun increasing their interest rates.
Overall, this is expected to translate into increased cost of private sector credit and consequently push cost of doing business up.
