100 days of Change: Bawumia explains robust cedi appreciation
The Vice President has attributed the cedi’s recent robust performance on the interbank market to a “massive increase in Ghana’s foreign exchange reserves,” secured in just 100 days of the current administration.
Dr Mahamudu Bawumia explains that when the Nana Akufo-Addo government took the reigns of power in December last year, it moved to neutralise the harsh economic effects of Ghana’s high indebtedness by re-profiling the country’s public debts.
Debt re-profiling usually involves financial restructuring to replace expensive debts with less expensive ones.
The Finance Minister, Ken Ofori-Atta, earlier this month led a team of government officials to raise about 2.25 billion dollars through various domestic bond issuances, constituting a total of $1.13 billion through the issuance of 15 and 17-year bonds at a coupon rate of 19.75%.
A statement released by the Finance Ministry shortly after the deal said an additional 1.12 billion dollars in 5 and 10-year bonds was raked in via a tap-in arrangement.
The two transactions, according to the ministry, are the largest amount issued in the sub-region and indicates renewed investor confidence in the country.
These moves by the Finance Ministry, according to Bawumia, forms part of Ghana’s public debt re-profiling drive.
Speaking at the Multimedia 100 days Town Hall event at the New Court Complex in Accra, the Vice President, who is the keynote speaker, said contrary to criticisms that more debts have been added, the action by the Finance Ministry has shored up Ghana’s foreign exchange reserves.
“From independence in 1957 to end of 2016, Ghana’s total foreign reserves was some 6 billion dollars, in less than 100 days we have increased this reserves to 8 billion dollars,” he said to an applause from hundreds of audience at the event.
Deputy Finance Minister, Cassel Ato Forson, had said the stability of the cedi was artificial because it has been made possible on the back of borrowing, a move he said would soon haunt the country.
He said, giving away a 15-year bond at 19.75 interest is too expensive because the previous National Democratic Congress (NDC) government got that same interest for a 7-year bond.
However, Dr Bawumia disagrees. He sees far-reaching benefits for the debt re-profiling.
The remarkable revelation about the transaction, which he called “the deal of the year”, is that Ghana has been able to get more foreign exchange without increasing its debt stock.
“That is indeed remarkable,” he said.
“The public debt ended at 122 billion Ghana cedis in 2016. And so, we [current administration] as a matter of strategy, begun re-profiling our debts,” he said.
“Many people didn’t quite understand the transaction and they thought we have gone to borrow two billion dollars to add to Ghana’s debt. No, we are actually replacing more expensive debts with less expensive debts, elongating it and making it better for this country,” he said.