The Ministry of Finance has reacted to the concerns raised by the Minority in Parliament over the energy bond issued recently.
The Minority describing the bond as ‘’Energy Bomb’’ at a press conference yesterday said, ignored investment advice from the IMF among others, resulting in the underwhelming GH¢6 billion yield of the bond.
Minority Spokesperson on Finance, Cassiel Ato Forson, said the complex structure of the bond coupled with government's unrealistic assumptions, caused the failure of the bond.
The former Deputy Finance Minister said, “if they had gone to the financial market on the strength of government of Ghana ratings, rather than the ESLA PLC which is unrated and unknown,” government could have saved the aforementioned 200 basis points.
Government issued a ten-year and seven-year bond with the aim of getting GHc6 billion to offset the legacy debts of the energy sector, which is about GHc10 billion.
But in all, a total of GHc4.69 billion was realized even after a seven-day extension period.
The 7-year component in the first-quarter of 2017, raked in 2.4 billion cedis as targeted, at an interest rate of 19 percent.
However, the 10-year bond failed to hit the 3.6 billion cedis mark.
Reacting to the comments by the Minority, Deputy Finance Minister, Kwaku Kwarteng said the interest of the bond was 19% because the government did not want to overburden the economy with interest payments.
“We gave instructions to this company [ESLA Plc] that as a matter of government policy, we do not want you to take bond beyond 20%, and so that is how they went to the market. Now on the 7 year bond, the minority is right; some of the investors invested immediately, some of them said that they have been used to buying Ghana bond at 25% or 26%, which was under the previous administration, but why is it that now you want to sell this bond and you are giving us this low, so we are not enthusiastic about it. That is the whole crux; it’s about the price on the bond.”
He further indicated that government convinced the investors that “the macroeconomic fundamentals are better, we think that the things investors should consider when they are lending to a country are far better than 2015, when they were buying government bond at 25 or 26 percent, so they should patronize our bond at the price we are giving and that we don’t want to move.”
“After several engagements – people want to call it begging – we sat down and explained to people, why below 20 is a fair price to give them. Thankfully, we now got all that we want for the seven-year bond at the rate of 19%. Now the 10-year bond we are facing a similar situation. The investors are telling us that if we can even come up to 21%, we will get what we want. We believe that if they do a proper analysis of the economy in the end, they will see at a maximum the 19.5% that we are presenting now as a fair price.’’
On whether they violated the constitution by failing to seek parliamentary approval as stated by the Minority he had this to say: ‘’ When you go to the bond market, you are not in a position to sit down and agree on a set of terms, take it Parliament, come back and you get those terms from the different investors. It’s not possible. We think that this press conference was completely unnecessary, bad taste and misinformed…In the eight of years of Rawlings, Mills/Mahama, they’ve never brought any bond issue to Parliament so why are they now asking why we did not take it to Parliament.? The NPP government is clear on what we are doing, we are not going to be pressured to give the kind of unhelpful and imprudent interest rates that we gave to investors. We will continue to engage and we are sure that at the end we are going to get the money that we want.’’