Bright Simons Demonstrates Acute Ignorance About Ghana’s EUROBOND Issuance – Charles Opoku

At the outset, let me state that Bright Simons’ choice of Kenya for this preposterous comparison demonstrates that he lacks appreciable knowledge and understanding of Kenya’s current fiscal narrative. Kenya is in deep fiscal crisis in that it could not even service its debt. In the last part of 2020, the Paris Club of Creditors was forced to grant Kanya’s request for a delay in some interest payment in other to keep the Kenyan economy afloat. Without this magnanimous posture of the Paris Club of Creditors, Kenya would have defaulted on interest payment or failed to pay salaries and other statutory expenses.

Ghana on the other hand, amidst COVID-19 induced tight fiscal space, was able to service it debts without asking creditors for reprieve or sacrificing payment of salaries and/or other statutory payments.

It therefore makes no economic sense, in fact, it defiles all forms of logic and common sense for Bright to hail Kenya who can’t service it’s interest payment at 15% and make mockery of Ghana who has been able to pay its debt interest at 45%.

If Bright Simons wants to downplay the gains made by government and make mockery of the progress we have made thus far, he should act smartly by using a country with enviable fiscal narrative.

Having said that, it is instructive to state that one do not need formal education to comprehend the widely accepted tenets of comparison; you compare things with striking common features i.e. apples to apples and oranges to oranges. It is the worse form of humiliation for Bright Simons, The Jack of all Trades, to compare two economic items (Euroband and IFM Loan- ECF/EFF) with striking distinct features and conditions.

You can’t compare a 3year US$2.34 billion IMF Extended Credit Facilitate (ECF) and Extended Fund Facility (EFF) with a US$3 billion EUROBOND (debt instrument) issued on the international capital market. Even a first year finance student will not compare an IMF concessional loan given as part of an economic program to a non-concessional loan raised on the capital market. It is totally unheard-of.

The IMF’s ECF and EFF given to Kenya is part of a program to support Kenya’s next face of COVID-19 response and plans to reduce debt vulnerabilities. It comes with conditionalities relative to broader economic and governance reformes, including addressing weakness in some state owned enterprises and strengthening transparency and accountability through anti corruption framework. The focus of this credit facility is not on making money from interest payment and that’s why interest on the facility is a paltry 2%.

The US$3 billion Eurobond issued by Ghana unlike the IFM ECF/EFF given to Kenya is a pure non-concessional loan – creditors are conscious of getting appreciable reward for their investment which is in the form of loan given.

So it’s normal to get IFM Extended Credit Facility and Extended Fund Facility at 2% interest rate and 8% interest rate on Eurobond raised on the international capital market. This is not rocket science that can’t be comprehended easily.

Government of Ghana has even done extremely well by issuing US$525 million 4-Year Zero Coupon, US$1 billion 7-year Weighted Average Life (at a rate of 7.75%), US$1 billion 12-year WAL (at a rate of 8.625%) and US$500 million 20-year WAL (at a rate of 8.875%) at a time of volatile market conditions and global trade disruption occasioned by a historic pandemic.

In 2016, when the global economy was sound and the capital market was relatively strong, Seth Terpker led the NDC government to raise a US$750 million Eurobond at whooping rate of 10.25% which was above the average African country cost of borrowing at the time. It therefore doesn’t make sense for one to criticize government for raising Eurobond at a rate of 8% which is below the Average African Sovereign bond rate of 10%.

It is important to note that Kenya is yet to go to the capital market since the emergence of COVID-19. It has planned to raise US$1 billion by end of June, 2021. So Bright Simons’ comparison is premature and preposterous.

Ghana is the trailblazer in Africa so far as the raising of bonds on the international capital market in a COVID-19 pandemic era is concern. Kenya, Nigeria, Ethiopia and the rest of our peers looked up to Ghana for somewhat inspiration and confidence to also go to the international capital market.

A report by Bloomberg on March 25, 2021 said “Ghana’s planned Eurobond sale will be a key test for appetite for African issuers after a raft of nations sought debt reliefs, shaking investor confidence”.

According to Gemcorp Capital LLP, the strong demand for Ghana’s Eurobond, which included Africa’s first Zero-Coupon dollar bond, would encourage other Africa countries to tap international capital market for money needed to roll over debt and finance strained budget.

Ghana didn’t disappoint Africa on that score; we made significant gains in the issuances that has brought about, a strong wave of confidence in Africa. Ghana’s Eurobond issuance was 2x oversubscribed at its peak, commendable amid a global pandemic.

Today, the likes of Kenya, Ethiopia etc. can confidently go to the capital market and use the successful story of Ghana relative to the Eurobond issuances to get a better deal, even as the COVID-19 pandemic grind steadily to an end.

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