She said the current rate of about 35 per cent on government securities was unsustainable, adding: “I dare say one of the reasons why we had to restructure our debts was because of the high-interest rates which were not sustainable”.

“Collectively, we must make sure that this era of low-interest rates on government securities will still remain low so that our private sector has a chance of affordable capital to produce for us,” she added.

DDEP

Speaking to the Graphic Business in her first interview since her appointment as the first female Managing Director of the Ghana Stock Exchange (GSE), Ms Amoah said all over the world, government securities attracted lower interest rates and in some advanced economies they even attract negative returns.

That, she explained, was because government securities had never been the basis for investors to receive higher returns and that the private sector was the window through which those with an appetite for higher risk received high returns.

“Ghana’s interest rates on government securities are not sustainable and anyone who builds their lifestyle around government securities cannot sustain it,” she emphasised.

However, she was optimistic that with the current Government of Ghana’s restructured debts, which had seen government interest on the 12 new bonds being traded at single digits, it would mark a new era of low-interest rates regime in the country.

Debt swap

After sustaining a voracious appetite for debt, most of which were pricy, for years, the country last year defaulted in servicing its obligations. It then turned to creditors for amnesty, which culminated in a DDEP that saw about GH¢87 billion of costly and short-dated bonds swapped for low-cost and long-term ones. 

A similar exercise is underway with the external debt as part of efforts to meet the requirements for accessing assistance of up to US$3 billion from the International Monetary Fund (IMF).

Treasury bills, which were exempted from the DDEP, are currently trading at a minimum of 35 per cent, a rate the GSE MD said was too costly and a bad benchmark for lending to the private sector.

“Cost of capital has been the number one bane for them (businesses) and so it is our prayer that we understand that the fund that the government borrows has to be affordable, has to be cheap and has to be competitive so that the private sector can have access to affordable capital. 

“If interest rates remain on government securities at single digit, our plans for our commercial paper market and the fixed-income market and our plans to attract more corporates to come and access more capital will come to fruition,” Mrs Amoah said.

Opportunity for investors

According to the GSE boss, “this DDEP comes as a huge opportunity for us.” 

“Today, the private investor realises that the government can borrow at a single digit interest rate because the 25 to 35 per cent interest rates on treasury bills and bonds are the benchmarks that the private sector had to compete against when they have to access funds,” Ms Amoah explained.

“We want to also grow the debt market, the debt market today is 95 per cent government securities, for us to be a real engine of growth, the private sector must actively participate in that space”, the GSE boss added. 

That, according to Ms Amoah, signalled positively to the private sector players and investors that they would not be crowded out of the financing space as a single-digit borrowing of the government became the benchmark. 

Investment analysts say the cost of capital has been the number one bane to the private sector therefore, with the DDEP, the government has now shown that long-term bonds can attract a low rate of nine per cent.

“It is our prayer that managers of the economy and all of us who have been in this space understand that the fund that the government borrows has to be affordable, cheap and competitive so that the private sector can have access to affordable capital.

“If interest rates remain on government securities at a single digit, our plans for our commercial paper market and the fixed income market, will attract more corporates to come and access more capital, short-term, medium-term and long-term capital and the fixed income side and the equity side will come to fruition,” Ms Amoah noted.

“Fundamentally, if these rates are that low, all other things will follow, it means that the prices as a consumer when you want to buy your goods would not be going up double or triple as we have seen, but you will be able to afford some of the basics and still save so that you can invest in the productive sectors,” she concluded.

On the issue of individual bondholders who refused to sign up for the government debt exchange programme, Ms Amoah was quick to refer to the government’s statement last week in which the government had indicated that it would honour all its obligations to such bondholders and that there was no cause for alarm. 

The government last week issued a statement in which it said the new 12 bonds it issued under its DDEP programme have been issued and settled and thus become the new benchmark bonds for the fixed-income market.

The government said it would ensure that the new benchmark becomes the basis for deepening the domestic sovereign bond market. In the statement, the government also noted its assurance to bondholders who did not tender their bonds for exchange that it would honour its obligations on both the principal and interest when such bonds were due starting from March 13, 2023.

Ghana’s interest rates regime is among the highest in the country, a situation that has compelled both the Chamber of Commerce and the Association of Ghana Industries to at every turn call on the banks to reduce the cost of lending.

Banks, on the other hand, have pointed to the cost of doing business in the country and the cost of capital, as well as the inherent risk in the economy in general as some of the major causes of the high-interest rate regime.