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Government is awaiting Parliamentary approval to issue a third Eurobond of up to US$1.5billion, higher than an originally planned US$1billion, by September for debt financing and budget support, Finance Minister Seth Terkper has explained.

According to Terkper, the purpose was to raise new capital to finance capital infrastructure for settling existing debt and revise expenditure -- but has yet to be given the legal backing by Parliament due to the additional US$500million attached to the new bond.

The Speaker of Parliament, Edward Doe-Adjaho, has directed the finance committee of Parliament to regularise the document from last year's US$1billion Eurobond government to be sync with the new one of US$1.5billion they plan on raising in September.

"Crude Oil has been trending downwards; if you are not going to get the revenue then revise expenditure downwards.  We have a refinancing component on that for domestic and sovereign bonds, especially 2017 bond; there is also use of counterpart funds."

Addressing the press after delivering the Mid-Year Review of the Budget Supplementary Estimates, when he asked parliament to approve government's request to spend an additional GH?865.7million, Terpker touched on the new element of the bond which he explains as new capital: "It means your sources of financing also changes your finance through bonds; impact is not just huge, it's the net of Gh?865million.

"In refinancing, if you do it well it does not affect you debt stock; it may impact your interest payment so we had to recalculate our interest payment.

"To help achieve the goals, the Eurobond issue will be backed by a World Bank Policy Based Guarantee -- another sub-Saharan Africa initiative, a first for the nation," Terkper said.

He also announced an increase in the deficit target to 7.3 percent of gross domestic product (GDP) from 6.5 percent on account of lower oil revenues.

Terkper also pointed out that it was to diversify funding sources and lengthen the maturity profile of the debt portfolio.

Earlier he told Parliament: "The short-term and more structural elements are designed to manage issues such as higher foreign-financed capital expenditure due to the exchange rate effects: rising inflation; impact of gold and cocoa prices; revisions in the benchmark crude oil prices used in the PRMA; additional spending related to the recent flooding; and refinancing of existing debt stock," he said.

Mr. Terkper's presentation to Parliament follows what he described as a strong first-half performance of the economy, which saw revenue performance above expectation with the expenditure brought under budgetary restraint.

According to the Finance Minister, the supplementary budget will not automatically translate into automatic expenditure increases for MDAs and MMDAs.

The amount is higher than the US$1.0 billion announced earlier by government, which is currently under a three-year aid programme with the International Monetary Fund.

Government had planned to issue the US$1billion Eurobond by the end of June, but this has been pushed back to September.

Source: B&FT online

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