Plunging asset prices threaten Ghana Eurobond plan

By:
Kanika Saigal
Published on:

Ghana's currency and Eurobond yields took a big hit last week as markets continued to take fright over its twin deficits. Here's the sorry tale in pictures.

African Alliance released their weekly report on sub-Saharan Africa fixed income, currencies and commodities on Friday and it seems like its more bad news for Ghana. The country has struggled during the past few months to fix its twin deficits and stem the free fall in its currency, despite the imposition of soft capital controls.

Recent interest-rate hikes by the central bank to 18% and tough new foreign-exchange controls introduced last month don't seem to be having the desired effects. The issues haven't gone amiss by ratings agency Fitch, which on Friday revised Ghana's outlook to negative after Standard & Poor's and Moody's lead in January. Now rumours are spreading Ghana has put its upcoming $1 billion 2014 Eurobond planned for April on hold due to shaky market conditions.

As the data shows, while African Eurobond yields have come down across the board and Ghana and Zambia's yields have declined 70 basis points and 60bp respectively, they remain the highest yields among their peers:


 
Source: African Alliance 


And unfortunately for Ghana its local currency bonds are underperforming compared with its peers as well:

 
Source: African Alliance  

And in even more bad news for Ghana, its currency has devalued against the dollar by 1.9% in the past week. The Zambian kwacha, however, was the region's worst performer, devaluing 2.1% against the dollar this week and topping off a pretty bad month, in which the kwacha has devalued 9.8%:

 
Source: African Alliance  


 
Source: African Alliance