Government has said it will be turning its attention to the Eurobond market as it seeks to raise a billion cedis to finance its budget deficit for the 2018 fiscal year, Finance Minister Ken Ofori- Atta has said.
Presenting this year’s Budget Statement and Economic Policy to Parliament on Wednesday, the minister revealed that government is to record a GH¢10.9 billion budget deficit, equivalent of 4.5 percent of GDP, which will be financed from both domestic and external sources including the Eurobond market.
Giving a breakdown of how the deficit will be financed, Mr. Ofori-Atta explained that: “Net foreign financing will amount to about GH¢3 billion (including a Eurobond of up to GH¢1.0 billion), equivalent to 1.2 percent of GDP.
Net Domestic Financing (NDF) will constitute about 73 percent of total financing and includes financing from bank and non-bank sectors, other domestic sources such as divestiture proceeds and mineral royalty prepayment. The total NDF is estimated at GH¢8 billion or 3.3 percent of GDP.”
Mr. Ofori-Atta’s return to the Eurobond market will be the first time for the Akufo-Addo government having issued a number of domestic bonds to help support government’s planned programmes.
Ghana made its debut on the Eurobond market a decade ago when it first issued a US$750 million at a coupon rate of 8.5 percent. It took the country close to six years before returning to the market for another Eurobond.
After the country’s second Eurobond in 2013, it became a regular activity for the Mahama-led administration as it went to the market in each of the four years that they were in power.
The planned GH¢1 billion Eurobond for 2018 will be Ghana’s lowest debt issued to date, that is, approximately US$222 million.
Set to achieve its 2017 budget of 6.5 percent despite recording lower than expected revenues, government appears to be going all out to ensure that it optimizes sources available to be able to meet its budget estimates.
The 2018 budget projects that government will rake in revenue and grants of GH₵51 billion with provision for total expenditure and arrears clearance expected to reach GH₵62 billion, leaving a deficit of GH₵10.9 billion, equivalent of 4.5 percent of GDP.