by Jerome Kuseh

On Thursday 23/02/2012, the Bank of Ghana issued GH¢200m worth of 3-year bonds with a yield of 14.99%. The issue, which was open to both local and foreign investors, was meant to fund servicing of maturing debt and to support government expenditure.

The bonds were heavily oversubscribed with bids totaling GH¢639m. However, according to Joy Business, only GH¢219m has been accepted with Reuters claiming that GH¢169m of the accepted bids were from offshore investors. This overwhelming response to the bonds underscores a healthy investor confidence in Ghana’s economy.

The move is also expected to shore up the cedi, which has suffered a free fall against major trading currencies. This bond is the first of four that will be issued each quarter of 2012. I will be most interested in those that will be issued in the last quarter. The results of that issue will be most indicative of investor confidence in government’s fiscal discipline as well as our socio-political stability.

With inflation hovering around 8.7%, the government must be determined not to lose the macro-economic gains during the year by fiscal indiscipline in an election year. The increase of the policy rate from 12.5% to 13.5% indicates that efforts are going to be directed towards maintaining single-digit inflation. However, all these efforts may come to naught if the cedi continues to weaken. That’s why I think the issue of the bonds is in the right direction.

I’ll continue to observe these bond issues and keep you up-to-date on any interesting developments.