It is one of the world's largest asset management groups, with over US$850 billion in Assets Under Management (AUM) on behalf of over 25 million private, professional and institutional investors, as at September 30,
2014.
It was founded in New York City in 1947. It is listed on the New York Stock Exchange, under the ticker symbol BEN, in honour of Benjamin Franklin, for whom the company is named after. In all my Wall Street years, I never had the opportunity to meet the founder, Rupert Harris Johnson Sr, who retired in 1956 and died in March 1989, aged 89.
Like our previous bonds, these bonds were issued in a competitive and transparent bidding process, managed by our Joint Book Runners (JBRs), namely: Barclays, Stanbic and SAS, who were appointed in 2015 under the previous Government.
As the normal practice since the book building process began in 2015, the Joint Book Runners announced the sale of the bonds, as per the second quarter Issuance Calendar. Subsequently, primary dealers who are mostly banks, mobilised interested foreign and local investors to participate in the sale.
External investors have been participating in our domestic medium term debt instruments of tenure, 3-years and above, since 2006.
Background
Mr Speaker, as you may recall, I came to this august House on 2nd March, 2017, to present the Budget Statement and Economic Policy of Government for 2017. In the Statement, I highlighted in paragraphs 850 and 851 the portfolio risk in our public debt stock, which included risks associated with interest rate uncertainties and auction failures.
Total auction failures for 10 weeks continuous in the first quarter of 2017 amounted to about GH¢ 2 billion. Further auction failures in the second quarter would have meant Ghana defaulting in repaying maturing bills.
Mr Speaker, on a weekly basis, the average maturing domestic debt amounts to about GH¢1.0 billion, an increase of about 100 per cent from the 2014 average maturities. This level of maturities are about a third of the monthly tax revenue collection by the Ghana Revenue Authority (GRA). It is interesting to note that a large proportion of the weekly maturing bills are 91 and 182-day treasury bills which we inherited. This development poses a significant risk to Ghana's debt dynamics.
Our preferred solution was not to add more debt to the already heavy burden which Ghanaians have had to carry. Consequently, the 2017 Budget announced the debt management strategy of re-profiling the domestic debt by refinancing a greater proportion of shorter-dated debt instruments with longer-dated instruments, as a risk mitigating measure.
Our expectation was that this clever and responsible way of managing the Ghanaian economy would be celebrated not only by the majority of Ghanaians, as it is indeed the case, but also by our friends on the other side of the aisle, who must take full credit for the remarkable feat of increasing Ghana's debt profile from GH¢ 36 billion in 2012 to GH¢122.3 billion in 2016.
As part of measures to implement the new debt management strategy, the Ministry published the second quarter Issuance Calendar on 30th March, 2017. In this calendar, Government announced plans to issue a total amount of GH¢ 2.50 billion, of which GH¢14.09 billion was to rollover maturities, GH¢2.55 billion was to be fresh issuance to meet Government's budget financing requirements and the remaining amount of GH¢5.6 billion, allocated for debt re-profiling.
Recent Analysis of Ghana's Debt Portfolio
Mr Speaker, if I may stress, Ghana's total public debt as a percentage of GDP increased significantly from 47.8 per cent of GDP in 2012 to over 70 per cent of GDP in 2016. [Uproar.] At the same time, interest costs, as a percentage of GDP, which was about three per cent in 2014, doubled to about six per cent by the end of 2016. That is GH¢10 billion worth interest payment a year. This development increased the country's debt distress. The chart below shows the trends in public debt from 2012 to 2016.
