Tuesday, 20 April 2021

Cedi, Reserves & BoP to remain strong… with $3bn Eurobond money


By Elorm Desewu

Ghana’s balance of payment, the cedi and Gross International Reserves are expected to improve significantly as the US$3  Eurobond money has hit the accounts of Bank of Ghana, (BoG).

The government made a successful debut into the International Debt Capital Markets securing US$3 billion from an oversubscribed bond book value of US$6 billion.

The proceeds will be used to support the budget deficit by funding growth-oriented expenditures; and conduct liability management on both external and domestic bonds.

Government in the 2021 budget announced its intention of executing a programme aimed at raising up to US$5 billion through Eurobond, Diaspora bond, Sustainable bond and Syndicated loans. This 2021 Eurobond is thus one of the four vehicles government intends to use to raise the up to US$5 billion.

The transaction comprised four tranches – US$ 525 million 4-Year Zero Coupon, US$1 billion 7-year Weighted Average Life (WAL) priced at 7.75%, US$1 billion 12-year WAL at 8.625% and US$500 million 20-year WAL with a coupon of 8.875%.

The successful issuance of the 2021 Eurobond is testament to investors renewed confidence in the Ghanaian economy and its managers.

Total exports contracted by 9.2 percent year on-year to US$2.5 billion in the first two months of 2021. This was driven mainly by a 25.8 percent year-on-year decline in crude oil exports (due to lower volumes), 12.2 percent decline in cocoa beans exports (due to lower volumes and prices), and 5.6 percent decline in gold exports (due to lower volumes).

Total imports, on the other hand, went up by 9.6 percent to US$2.2 billion, underpinned by a 12.9 percent year-on-year increase in non-oil imports due to a pick-up in economic activities. Consequently, the trade balance recorded a lower surplus of US$339.7 million (0.5 percent of GDP) in the first two months of 2021, compared with US$791 million (1.2 percent of GDP) same period in 2020.

Gross International Reserves at the end of February 2021 was US$8,719.7 million, providing cover for 4.2 months of imports of goods and services. The reserve level compares with the end-December 2020 position of US$8,624.4 million, equivalent to 4.1 months of import cover.

The Ghana Cedi appreciated by 0.6 percent against the US dollar in February 2021, compared with an appreciation of 4.5 percent in the same month of 2020. The Ghana cedi also appreciated by 3.6 percent against the Euro and depreciated by 0.9 percent against the Pound Sterling, compared with corresponding 7.0 percent and 7.8 percent appreciation over the same period in 2020.