Ghana Says Eurobond Yields Don’t Reflect Economic Reality

(Bloomberg) -- Ghana's widening Eurobond spreads fail to account for the West African nation's economic rebound from the fallout from the coronavirus pandemic, the nation's finance ministry said in a bid to reassure investors.

The nation's dollar bonds slumped 6.1% this month as investors judge that re-financing debt in the Eurobond market won't be an option when the U.S. Federal Reserve hikes rates, and some budget targets remain elusive. 

“Whereas the current trading levels of our Eurobonds have widened, we do not believe that it is warranted nor do we believe that it reflects the strong underlying fundamentals of the Ghanaian economy and our rapid rebound” from the impact of Covid-19, the Finance Ministry said in a statement Sunday. “Ghana's fundamentals remain strong.”

Africa's top gold producer is seeking to assuage investors concerned about the government's finances and the nation's ability to raise capital. A divided parliament is also complicating President Nana Akufo-Addo's efforts to boost tax revenues with opposition lawmakers blocking attempts to introduce a new levy on electronic money transfers.

The premium investors demand to hold Ghana's dollar bonds rather than U.S.Treasuries widened 29 basis points on Monday to 1,125, a level considered as distressed. Yields on the nation's 2026 Eurobonds rose four basis points to 13.04%. 

Meanwhile, Fitch Ratings downgraded Ghana's long-term sovereign credit deeper into junk territory Friday, citing risks to the nation's “financing needs” after it lost access to international debt markets.

The ministry decried that foreign investors were on “on edge following the impasse in Parliament,” adding that the debate in the house shouldn't be seen as a fiscal risk.

The nation's economy expanded 6.6% in the third quarter -- faster than estimated by economists -- , has exceeded tax revenue target for 2021, and has more than five months of import cover despite the reduced participation of foreign investors, the ministry said.

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