Ghana seeks Eurobond to support structural reforms

Ghana is looking to issue a Eurobond but the success of structural reforms will determine the success of the bond, a risk analyst told CNBC Africa on Wednesday.

The Eurobond is expected to set the scene for future economic growth.

“There’s still massive investor appetite but it will largely be sentiment driven. Ghana’s got to push through some really credible structural reforms because when it does go to market, sentiment is going to play a big part in the Eurobond success or failure,” said Ronak Gopaldas, country risk analyst at Rand Merchant Bank in South Africa.

Less than six months into his presidency, Ghana’s President John Mahama has been quickly ushered into his role as Ghanaians vie for more job opportunities and better access to basic services.

“Most presidents, when they come into office, get a bit of a honeymoon period just to settle down, to get things going, it hasn’t really been the case for President Mahama,” said Gopaldas.

“He’s had power outages, water shortages, labour unrest to deal with, the economic data’s been very bad, the negative watch by Fitch came out and also the shadow of the Supreme Court trial is hunkering over his head.”

Ghana’s stock market is up more than 50 per cent this year, but the Supreme Court case election petition against President Mahama having rigged the 2012 elections might affect investor confidence in the country.

Court proceedings have found a number of irregularities during the presidential election but whether or not they are enough to overturn the initial outcome of the election is yet to be seen.

“The key now is to get some finality on the matter and I think what we will see in the next election is electoral reform. I’d be highly surprised if the results of the election were overturned,” added Gopaldas.

Ghana’s current account deficit has shot up to 12.1 per cent, funding is coming through at very expensive rates, and Gopaldas expects the fiscal deficit to contract slightly to only 9 per cent.

Fuel subsidies have already been removed and government has also issued a freeze on any new projects, but investors will have to watch over aspects such as Ghana’s supplementary budget and its engagement with the IMF on funding and assistance to gain better clarity on Ghana’s economic direction. The review of utility tariff increases will also play a major role in Ghana’s progress.





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