Govt Bonds Oversubscribed

AN INITIAL plan by Government to sell GH�500 million (US$264.6 million) worth of three-year bonds at a recent auction has culminated in its acceptance of more bids to the tune of GH�1.4 billion or $747 million. The bonds, which come with an average yield of 21 percent, were oversubscribed by 150 percent, Kwabena Duffour, Ghana�s finance minister recently indicated. Government�s bid to raise some GH�500 million was targeted at restructuring short-term debts and further strengthening the local currency. It is the third time this year that the current administration has floated bonds for cash. Earnings from the bonds will also go a long way to help mop up excess liquidity in the country�s economy particularly the Ghana cedi which has been struggling with major international currencies as result of the high demand for the dollar by local traders. The cedi has lost over a third of its value since Ghana began producing oil. Prior to the auctioning of the latest bonds, the Central Bank has already held auctions for three-year and five-year government bonds between February and August. Following such activities, the Ghana cedi stabilised in the month of August and registered mild appreciations in September this year. However, Renaissance Capital, an investment bank, has noted in its recent report on the Ghana cedi: �We expect uncertainty to increase as the elections approach, owing to concerns about policy continuity and the possible build-up of tensions during the campaign period. We think this will be negative for the cedi, as some short-term investors close their positions and others adopt a wait-and-see approach.� Meanwhile, the strong correlation between the price of gold on the world market and the Ghana�s foreign exchange reserves suggests that reserves could continue to improve in 2012, a positive development for the cedi.