The Ministry of Finance has taken its first major step towards issuing up to US$5 billion in bonds on international capital markets next year, by starting the process to select transaction advisors.

According to the Ministry’s announcement: “The Government of the Republic of Ghana intends to launch a 2021 International Capital Market (ICM) funding programme for the medium term.

For the 2021 portion of the programme the government intends to raise up to US$5.0 billion to support growth-oriented expenditures in the 2021 budget, conduct liability management including refinancing domestic debt and a buyback of some selected outstanding Eurobonds.”

Interestingly though, it is possible that the issuances will not be restricted to Eurobonds, as has been customary since Ghana began accessing the international capital market in September 2007. The Ministry’s statement lists Eurobonds, Diaspora Bonds, Sustainable Bonds (such as Green Bonds and Social Bonds) as well as Syndicated Term Loans as the instruments to be used for the financing.

Timing seems to be a crucial factor in government’s plan; potential transaction advisors are being asked to indicate their willingness in writing to provide bridge financing if needed and the quantum, terms and timing thereof

Transaction advisors, comprising Lead Manager and Co-Manager for each instrument will be required to advise, guide and drive the international capital market funding process including the structuring and documentation; carry out market sounding through roadshows and other forms of engagement with institutional investors and lenders; participate in bridge financing if necessary; and ultimately ensure financial close of the programme.

Local advisors will also be contracted to be involved in executing the programme.

Both international and local legal counsel are also being sought to participate in executing the programme.

Ghana’s public debt to Gross Domestic Product ratio reached 70.1 percent in October, eliciting warnings from the International Monetary Fund that the debt is approaching unsustainability. Most of the financing to be raised from the international capital market in 2021 is for refinancing of existing debt.

Government is hoping to take advantage of the current low interest rate regime for dollar denominated bonds, brought about by monetary easing in response to the economic challenges worldwide arising from COVID-19, to reduce its debt servicing costs.

It also aims to use part of the financing to replace relatively high interest cedi denominated bonds which were issued with coupon rates of between 18 percent and 21 percent.