Minority slams gov’t; Eurobond interest can build 10 N1 Highways

The Minority in Parliament has ridiculed government’s celebration of the recently oversubscribed 1 billion dollar Eurobond.

Government has disclosed how proceeds of the 1billion Eurobond will be used which includes settling debts to the Bank of Ghana, providing seed capital for the Infrastructure Fund and to finance capital projects.

But the minority insists the eventual cost of the bond could build ten more N1 Highways.

Minority leader Osei Kyei Mensah Bonsu told journalists at a news conference, Wednesday, that Ghana’s current B1 ratings makes the country no longer attractive to investors.

“To put matters in proper perspective, our first Eurobond issue with a ‘naked’ Sovereign Guarantee attracted a yield of 8.50%. At the time, our credit rating under President Kufuor was B3 or B . We went to the market then without a World Bank Insurance cover because our macroeconomic fundamentals were strong, our rating was very good and our debt was sustainable. Even though the global credit crunch was rife in 2007 and average LIBOR was 5.251%, we only paid a little premium.

“Fast forward to 2015, Ghana’s Sovereign Guarantee is of no value, our rating has deteriorated to junk status, our debt is unsustainable, LIBOR is 0.5266%, and yet in the face of a PBG, we had to pay a premium so high that the yield on the issue was 10.75%.

“This is the highest yield on an Eurobond issue ever paid by an African country. It is embarrassing, to say the least. How can a developing country like Poland get a yield of 0.94% on the same day that Ghana issued? Angola, last week postponed plans for a $1.5 billion bond to await better market conditions. Even Zambia with all of its problems got a yield of 9.37%.

“Ghana was desperate. We so much needed the money that we were prepared to pay any yield to sell the bond. Why did we reduce the size of the offering by $500 million? It is because of our worsening credit fundamentals. At this rate, we have to cough up $107.5 million a year for the next 15 years in interest payments on this bond alone.

“That means that over the next 15 years, interest payments on this bond alone could have provided the country with ten [10] N1 highways with all the needed flyovers,” the MP for Suame said.