Government has unveiled a new domestic debt securities issuance calendar for the period June to August 2021. Interestingly the new calendar overlaps part of the immediate past one which was released less than two months ago, covering the second quarter of the year i.e. April to June.

Actually, this is not unusual – government’s domestic debt calendar is a rolling one but situations such as this, where a new one overlaps the previous one, suggests complications in debt management that have forced a rethink of debt issuances for the period.

For the period in question, Government plans to issue a gross amount of GH¢21,960.00 million, of which GHȼ19,864.43 million is to rollover maturities. The remaining GH¢2,095.57 million is fresh issuance to meet Government’s financing requirements. Per this calendar, Government aims to build benchmark bonds through the issuance of the instruments as follows: the 91-day and 182-day bills will be issued weekly while the 364-day bills will be issued bi-weekly also through the primary auction with settlement being the transaction date plus one working day; all of these restricted to locally domiciled investors only. Securities of 2-years up to 10-years will be issued through the book-building method and will be available for non-resident as well as resident investors.

Altogether GHc11,200 million in 91 day bills will be issued; GHc1,710million in 182 day bills; GHc1,450 million in 364 day notes; GHc1,200 million in two year notes; and GHc1,800 million in three year notes. There will be one issuance of six year bonds, in July, to the tune of GHc1,800 million; one issuance of seven year bonds, in June, also of GHc1,800 million; and an issuance of 10 year bonds, of GHc1,000 million in August.

Again, government has weighted its domestic debt issuances towards the shortest end of the spectrum with

The Calendar is developed based on the Net Domestic Financing provided in the 2021 Budget Statement and the Medium Term Debt Management Strategy (MTDS) for 2021-2024. It depicts securities that are intended to be issued in respect of Government’s Public Sector Borrowing Requirements for the period June to August, 2021.In addition, the Calendar takes into consideration Government’s liability management programme, market developments (both domestic and international) and the (supposed) Treasury & Debt Management objective of lengthening the maturity profile of the public debt.

In recent weeks investors have preferred medium to long term securities because of much higher yields they offer due to the steep yield curve currently in place. However, government has recently preferred issuing shorter tenured securities to minimize its debt servicing costs.

Again, government has weighted its domestic debt issuances towards the shortest end of the spectrum with 91 day bills worth GHc11, 100 million to be issued over the three months, this amounting to 50.6 percent of the entire issuances scheduled for the period. Instructively none of the other tenors will have issuances of up to GHc2,000 million. While there will be issuances for all tenors available for subscription by foreign investors – from two years to 10 years – each tenor will only be issued once.

In June there will be an issuance of seven year bonds to the tune of GHc1,800 million, in July GHc1,800 each in three year and six year bonds respectively, and in August, GHc1,200 million in two year notes and GHc1,000 million in 10 year bonds. However, there will be no 15 year bond issuances, the longest tenured domestic debt issuances done so far.

This is in stark contrast to its erstwhile debt management strategy of seeking to elongate the average tenor of the public debt to reduce rollover risk. The change in strategy has been made necessary by inordinate debt servicing costs which will take up a projected 49.5 percent of targeted tax revenues for 2021.

The structure of the new debt calendar suggests that government is largely satisfied with its foreign exchange position for now which means it is not hard pressed to issue medium to long term securities which foreign investors can buy up using foreign exchange.

Indeed, gross foreign reserves were already above US$8 billion even before government’s latest US$3 billion Eurobond issuance in March and just last week COCOBOD secured agreement for US$2 billion in syndicated financing for local cocoa purchases for the 2021/22 crop season. Since farmers are given the cedi equivalent government gets to keep the foreign exchange. Instructively this relatively high foreign reserves level coupled with the Bank of Ghana’s forward forex sales have enabled the cedi to actually appreciate against the dollar during the first half of this year.

Furthermore, it also indicates that government is learning its lessons with regards to the foreign exchange risks that accompany foreign investment in cedi denominated domestic debt securities. While the forex inflows from such issuances are useful, whenever those foreign investors are reluctant to roll-over their investments intense pressure is put on the cedi’s exchange rate as available forex has to be used to redeem their subscriptions.