Budget Pain Abating for Ghana Prompts Longest Cedi Bond Sale

ACCRA (Capital Markets in Africa) – Ghana is selling its longest local-currency bonds as the stabilizing cedi and government steps to rein in a budget shortfall stoke appetite for the West African nation’s debt.

The Finance Ministry gave final guidance of 19.75 percent for the 15-yearcallable bonds and is due to stop accepting bids at 3 p.m. in Accra. Yields on the government’s local debt have fallen in the past month, helping the ministry place 1.4 billion cedis ($320 million) of notes before Friday’s sale in the first three months, up 30 percent from the same period a year earlier.

The offering from the world’s second-biggest cocoa producer comes after Ghana’s central bank cut its benchmark interest rate for the second time in four months on March 27 as the cedi recovered from record lows and inflation slowed to the lowest rate in more than three years. Investors are betting President Nana Akufo-Addo’s government will succeed in enforcing budget discipline after the world’s second-largest cocoa producer shook local marketsat the start of the year when it announced a bigger-than-expected budget gap.

“The issue in recent years was the over-reliance on short-dated securities, which increased refinancing risk,” Samir Gadio, an Africa strategist at Standard Chartered Bank in London, said by email. “Extending the maturity profile of the curve will alleviate these concerns.”

The Cedi climbed 1.2 percent to 4.3212 per dollar as of 2:37 p.m. in Accra after Ernest Addison was appointed as the nation’s new central bank governor. He replaces Abdul Nashiru Issahaku, who quit this week after only a year in the post, citing personal reasons. Addison is likely “to strike a balance between price stability and economic growth,” according to Courage Martey, an Accra-based economist at Databank Group.

The cedi has rebounded almost 10 percent from a record low at the start of the month after Finance Minister Ken Ofori-Atta announced plans to narrow the fiscal deficit, which was 8.7 percent of gross domestic product in 2016. Inflation has slowed to 13.2 percent from 18.7 percent during Issahaku’s time as governor.

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