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Bank of Ghana keeps benchmark interest rate at 26%

25 January 2016 Comments (0) Africa, Business, Latest Updates from Reuters

ACCRA (Reuters) – Ghana’s central bank kept its benchmark policy rate at 26 percent on Monday citing moderation in the pace of consumer inflation, its governor Henry Kofi Wampah said.

The West African nation is under a three-year aid program with the International Monetary Fund (IMF) to support an economy dogged by high fiscal deficits and public debt, with consumer inflation consistently above government target.

The Bank of Ghana had set the current rate in November, its highest level in 12 years.

“The current tight monetary stance, supported by the continuing fiscal consolidation and improvement in the energy situation have led to a low risk in the outlook,” Wampah told journalists.

Ghana’s consumer inflation rose marginally to 17.7 percent, one of the highest in the West African region but Wampah said the central bank’s monetary tightening in recent months could limit any further rise.

“Going forward, the committee expects the slower pace of price changes to continue and steer inflation down towards the medium target band of eight percent, plus or minus two percent,” Wampah said.

Ghana’s economy is expected to pick up speed this year, even as the government abides by IMF-set spending limits, and Wampah said the bank had begun its zero financing of the budget deficit limit placed on it under the aid deal.

The country is preparing to hold presidential and parliamentary elections in November which are expected to produce a tight race between President John Mahama and Nana Akufo Addo of the main opposition New Patriotic Party, partly due to economic concerns.

 

(Reporting by Kwasi Kpodo; Editing by Edward McAllister and Dominic Evans)

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Ghana delays Eurobond it expected to launch on Friday

2 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

Ghana money

ACCRA (Reuters) – Ghana has postponed a Eurobond sale of up to $1.5 billion it had expected to launch on Friday amid a rise in borrowing costs for emerging market nations, a senior government official said.

Analysts said the delay, following roadshows in London and the United States, was probably a response to the prospect of having to pay higher yields after concerns about China’s economy and a possible U.S. rate rise roiled global markets.

Eurobonds issued by other commodity-exporting African countries have sold off sharply in recent weeks as metals prices have plunged.

Ghana’s planned issuance was mainly to refinance debt. The country is heeding an International Monetary Fund programme to stabilize its economy in the face of a fiscal crisis that includes a debt to GDP ratio around 70 percent.

Senior Ghanaian financial policymakers have concluded a roadshow in London and U.S. cities and are returning to Accra. Officials said the launch could still happen in the near future.

“What it means is that we are not closing the book (launching the Eurobond) today,” said the official, who declined to be named. “But we are still live in the market and could seal a deal anytime we deem fit.”

A finance ministry statement said Ghana continues to consider the bond issue subject to market conditions. Another senior official told Reuters there was significant interest in the bond but the yields were not attractive.

“The reason why the deal is not announced yet, I suspect, is that the government was surprised that the cost of funding was still elevated relative to their expectations,” said a London-based fund manager.

Investors were demanding a high premium despite a World Bank guarantee for the bond of $400 million and the government appeared to be considering cutting the bond to $1 billion or lower to get the desired pricing, the manager said.

The manager said Ghana wanted to pay a 9.5 percent yield for the bond, while a source involved in book running for the launch said the market was demanding closer to 11 percent.

Angola on Wednesday cancelled plans for a $1.5 billion Eurobond due to challenging economic conditions and has not set a new time frame for the issue.

GROWTH SLOWS SHARPLY

For years, Ghana had one of the strongest economies in sub-Saharan Africa thanks to exports of gold, cocoa and oil. But growth has slowed sharply in the last two years due to a fall in global commodity prices and economic instability.

The government forecasts GDP growth at 3.5 percent this year and is under pressure to boost the economy ahead of what is expected to be a tight election battle in 2016, when President John Mahama will run for a second term.

“The Eurobond is critical in helping to anchor stability in foreign exchange rates and for government to refinance existing Eurobond issues,” said Sampson Akligoh, managing director of InvestCorp investment bank, which is based in Ghana.

The cedis gained slightly on Friday against the dollar but a trader said sentiment could turn bearish next week if the bond was not launched, given the market expected inflows from it and a $1.8 billion cocoa loan.

The yield on Ghana’s outstanding 7.87 percent Eurobond due 2023 has surged to record highs above 11.3 percent, according to Tradeweb data.

The average yield premium investors demand to hold emerging sovereign dollar bonds over U.S Treasuries soared almost 100 basis points in the third quarter. It now stands at 470 bps, close to 6-1/2 year highs hit at the end of last month, according to JPMorgan’s EMBi Global index.

But the average premium demanded of African sovereigns rose by an even greater 160 basis points in the third quarter and stands at 520 bps over U.S. Treasuries on the EMBIG index, while Ghana’s premium has jumped by 200 bps in this period to 914 bps.

(By Matthew Mpoke Bigg and Kwasi Kpodo, Reuters)

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Ghana’s Cocobod signs $1.8 bil loan for 2015/16 crop purchases

18 September 2015 Comments (0) Africa, Business, Latest Updates from Reuters

ACCRA (Reuters) – Ghana’s cocoa regulator signed a $1.8 billion loan with international banks on Thursday to finance purchases for the 2015/16 season, its spokesman said.

Ghana is the world’s second-biggest producer of cocoa and this year’s syndicated loan, signed in Paris by some 23 lenders, will be used to purchase around 850,000 tonnes, Cocobod spokesman Noah Amenyah said.

Lead arrangers for the facility, the largest soft commodity deal in sub-Saharan Africa, were Barclays Bank, Commerzbank, Deutsche Bank, French investment bank Natixis and Japan’s Sumitomo Mitsui Banking Corporation.

Amenyah said the loan was oversubscribed by 44 percent to $2.6 billion but Cocobod took only $1.8 billion as originally planned at 1.19 percent over eleven months. Cocobod raised $1.7 billion from a similar syndication a year ago.

“Once again, the syndication was oversubscribed and it shows the increasing confidence of the lenders in Cocobod’s management and its operations,” he said.

Inflows from the loan, to be drawn in early October, are expected to help boost the central bank’s reserves in support of the local cedi currency, which is currently down around 26 percent, Amenyah said.

Deputy chief executive James Kutsoati said Cocobod hopes to open the new season on Oct 2 after closing the current season at the end of September.

Ghana is experiencing a poor cocoa harvest this year with output down 23 percent from last year due to harsh weather and poor farming practices.

Purchases hit the 700,000 tonne-mark in late August and it appears the country will miss its revised 750,000 tonne-target as the crop year draws to a close this month.

(By Kwasi Kpodo, Reuters)

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