He said financing the budget deficit with Eurobonds was not a problem but the challenge was the rates at which they were being issued.
The country issued its first Eurobond of US$750 million 2007 at a coupon rate of 8.5 per cent. Subsequently, three separate Eurobonds amounting to US$1 billion each have been issued by the government in 2013, 2014 and 2015 at coupon rates of 7.88 per cent, 8.13 per cent and 10.75 per cent respectively.
Speaking at the Association of Certified Chartered Economist’s fourth Continuing Professional Development (CPD) and induction ceremony Dr Atulik, said this trend was an indication of increasing levels of perceived risk by the Eurobond market participants. According to him, this trend is likely to further push the Eurobond rates further high next year.
He said the trend also suggested a distress debt position for Ghana, a position the IMF has confirmed.
He noted that the US$3 billion Eurobonds which were issued between 2013 and 2015 had, however shifted the mix of the country’s public debt to contain more external debt than domestic debt from 2014.
He said the advantage of this shift was the reduction in the crowding out effect on businesses.
On the available options for financing the country’s fiscal deficit in the 2016 budget, Dr Atulik said the use of domestic debts also poses challenges because the domestic capital and money markets were not liquid enough to support such long term borrowing.
He said this option would also crowd out the private sector as the evidence suggested that investors who buy Ghana’s domestic debts were mainly foreign residents.
Restoration of the economy
Dr Atulik also pointed out that the Ghanaian economy was in decline and needed urgent restoration.
“Restoring the national economy requires determined action and a deep commitment to transforming our nation from a crisis ridden present into something all Ghanaians can be truly proud of,” he said.
“Fiscal discipline is a fundamental requirement for restoring the national economy and the IMF is not the long term solution. Self-determination by the government of a country is what is needed to restore the national economy,” he added.
A chartered financial economist, Mr Joseph Asantey, speaking on the evolving global banking industry, said any serious discussion of the future of the banking industry eventually raised a basic question: of whether future customers would still need banks.
He said the answer depended on the banks themselves and with technology and nonbank businesses providing new options for safeguarding and managing their finances, customers would continue to depend on banks only as long as banks could provide service and value that could not be found anywhere else.
“There are already signs that customers are questioning the ability of banks to look out for their financial wellbeing. As a result, banks have begun to rethink what, where and how they serve an increasingly informed and demanding customer base,” he noted.
He said an examination of the forces shaping the industry revealed that the future will require superior efficiency and operational excellence from all banks.
Ultimately, to deliver on these imperatives, he said the banks would have to focus on their core strengths which are those activities in which they excel and partnering with best in areas where they have weaknesses.
“But most of today’s players, including universal banks, community banks, industry specialist banks and non-bank banks, will still be vying to differentiate themselves in a crowded marketplace,” he pointed out.