Controversy over $2.25bn Bond is dangerous to Ghana’s Economy  

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The Finance Minister, Ken Ofori-Atta has maintained that, the US$2.25billion bond issued by the government in April was done transparently without any “breaches of integrity.”

However, the Minority is still holding on to government of wrongdoing and Mr. Ofori-Atta of conflict of interest and insider trading.
According to them, Franklin Templeton Investment Limited which acquired about 95 percent of the domestic bond has a direct relationship with Enterprise Group, a company Mr. Ofori-Atta has an interest in.
The Member of Parliament for Bolgatanga Central, Isaac Adongo, insists that government provides the names of those who subscribed to the US$2.25 billion controversial bond to prove its innocence in the conflict of interest allegations.

Despite, Mr. Ofori-Atta’s appearance before parliament, last week, to disclose the circumstances leading to the issuance of the bond, the minority seems unconvinced, hence their demand for the names of the subscribers.
Before the minister’s appearance at the floor of parliament, the minority asked for certain details including the issue certificate, the issue date, the denomination of the issue and the names of subscribers. The minister, however, could not furnish the house with the names of the subscribers because he said that information is classified.

But, the Bolgatanga Central MP disagreed saying that, the sale of bonds is not an illicit activity for any information to be labelled as classified.

He maintained that there is absolutely nothing wrong with making the names of those who bought the US$2.25 billion bond public.
But, Mr Ofori-Atta has advised the Minority against making further negative commentary on issuance of the bond as it deters investors.

‘We must appreciate and recognize the potential disastrous consequences some of the discussions on air about this bond will have on investor confidence in our country as a safe haven for investment and growth,” he said.

Agian, the minority has again accused the finance minister of causing financial lost to the state to the tune of about GHC5 billion.
Mr. Cassiel Ato-Forson, the Ranking Member of the Finance Committee and MP for Ajumako-Enyan-Essiam Constituency, responding to the claims by the Finance Minister argued that the said US$2.25billion bond which was issued with a coupon rate of 19.75% cause the country a whopping amount of GH?5billion in fifteen years.
“I don’t know how they arrived at GHC600million. Looking at April 2017, the short term yield as the Minister alluded to used part of the proceeds to switch. Mr. Speaker, if he is switching, as at April 17, the 91 day has a coupon rate of 16.35% and the 182 day has a coupon rate of 16.7%. We are borrowing at 19.75% and we are hearing that we have made savings because of the switching. Per my calculations, if you borrow an amount of US$2.25billion at 19.75 and you used it to switch short term debt of 16.35%, you have caused the State GHC330 million losses per annum. If you multiply it by 15 years [GHC4,950,000,000] the total loss to the State is GHC5billion. So, where is the savings coming from?” he quizzed.
Meanwhile, responding to the Minority’s claim in an hour long address, Mr. Ofori-Atta explicitly stated that nothing illicit or untoward occurred in the transaction.

“It may be tempting to say that the apparent attempt to manufacture some form of integrity deficit in the process is generally borne of out a lack of understanding of the actual process on the part of the minority,” he said.

He added: “All prospective bidders bid through their primary dealers, who in turn submitted the investor’s bids through the Central Securities Depository platform. The joint transaction advisers then collate these bids to build up a book on which the bonds are issued.

“At no time during the book building process did the Ministry of Finance negotiate with any investor in any way, and it will indeed be quite difficult to manipulate the process when the three financial institutions are governed strictly by the Bank of Ghana’s rules and regulations.”

“There were no breaches of integrity either on government’s part or on the joint book runner’s part,” he emphasized.
The minority has consequently registered their unsatisfactory disposition with what the minister presented in parliament. They explained that, the minister only gave them documents that they could easily get from the websites of the Securities and Exchange Commission and the Bank of Ghana.
However, they expressed satisfaction over the response of the United States Securities and Exchange Commission (SEC) to a petition the minority sent to the body.
The United States Securities and Exchange Commission (SEC) has appointed a case manager for the petition filed by the Minority over government’s recent $2.25 billion bond issue.
Additionally, Mr. Ofori-Atta informed Parliament that, the bond transaction which has become a controversial issue in some Ghanaian quarters that the said transaction is impacting positively on the economy.
For instance, he said the 15 and 7 year old bonds have triggered a downward trend in the cost of borrowing and also strengthened Ghana’s current account and built its international reserves. The Cedi to US Dollar rate which was 4.46 in February 2017 and 4.34 in March 2017 appreciated to 4.19 as at end of April 2017.
The bond, he further noted, has also had a significant impact on Ghana’s credit ratings. This, he added, is evidenced in Fitch Ratings a few weeks ago where the rating agency affirmed Ghana’s sovereign rating at B and revised the outlook from negative to stable.
“This is significant good news for investors and the economy,” he noted.
Additionally, he said the bond which was issued domestically has eliminated the costs associated with cross continental road shows and saved the country about GHC600 million in interest payments and reduced refinancing costs associated with short term borrowing.
Source: Adnan Adams Mohammed

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