As the 2007 Eurobond matures this year, government has been advised not to issue any international bonds this year to help reduce Ghana’s debt stock.
The 10-year 750 million dollar bond, which was issued in 2007 at a cost of 8.5 percent, opened the way for Ghanaian to issue subsequent bonds, ballooning the country’s debt stock.
Before leaving office, former Finance Minister Seth Terkper maintained that government set up the Sinking Fund to prevent bullet payments of Ghana’s Eurobonds.
Speaking to Citi Business News on the subject, economist, Dr. Eric Osei-Assibey cautioned government not to issue a Eurobond but issue local bonds and allow foreigners to participate in it.
“I don’t expect an increase in Eurobond but that will depend largely on the cost conditions in the domestic market. The budget is such that [government] is still going to borrow more from the domestic market,” he noted.
Dr. Osei-Assibey warned that government must target its fiscal policies toward stabilizing the macroeconomic indicators, particularly interest rates.
Touching on short and long term instruments, Dr. Osei-Assibey maintained that it will be economically prudent for government to go for long term debt to create some fiscal space.
“If the focus is on long term debt other than short term debt, then that gives enough leverage and then enough latitude to manage the fiscal,” he advised.
He added that “If we also allow non-residents to lend to government through the domestic bond that will also help bring in enough inflows”.
Outlining more innovative ways to manage the country’s debt, Dr. Osei-Assibey was of the view that the Finance Minister must renegotiate to rollover to extend the maturity period of some government debt.
“As it matures government can renegotiate and extend it over a long period of time. If these things are put together and they are done very well, it will reduce the fiscal pressure and over time, interest rates will come down,” he said.