Dollar denominated bonds to stabilize cedi – Economist
Economist, Dr. Lord Mensah says government’s dollar denominated bonds to be issued next month, will help stabilize the cedi.
A revised calendar on government’s borrowing from August to December this year, shows that government will issue a total of 25.2 billion cedis for the period to settle forecasted maturing debts.
Of the amount, a 5 year 1 billion cedis bond or its equivalent in dollars, will be issued next month.
Dr. Lord Mensah believes the decision could not have come at a better time as there is more demand for the dollar especially within this period.
“I think it’s a good idea looking at the time that we are considering going to the international market if we are purposely going to borrow to shore up our currency. In the end, money borrowed cannot be kept in government accounts thinking that they have nothing to do but then just to cushion the cedi,” he told Citi Business News.
Dr. Mensah however cautioned that government must invest the proceeds in economic ventures in order to reap the full objectives of stemming the cedi from depreciating against major trading currencies.
“Every single currency that is being borrowed should serve a purpose so at the end of the day when it comes to paying back, we do not struggle,” he cautioned.
“If we do not have any reason to borrow, it’s not about just going on a borrowing spree. I think that anybody that goes to borrow has a purpose for that and that is indicated in the prospectus,” he further remarked.
Some have argued that the 25.3 billion cedis to be borrowed is rather on the high side as it increases government’s burden on reducing the country’s debt to GDP ratio.
Though Dr. Lord Mensah admits that the development is worrying, government has no option than to go ahead and issue the bonds to meet its need for funds.
According to him, the balance of 1.4 billion cedis in its issuance and settlement is even less compared to the 1.8 billion cedis Finance Minister, Seth Terkper sought from Parliament during the mid year review of this year’s budget in July.