Eurobonds cannot solve our problems - Business players

The Association of Ghana Industries (AGI) and the Ghana Union of Traders Association (GUTA) have expressed varied opinions on the $l billion Eurobond deal by the government to stabilise the economy.

The AGI lauded the government for its effort, but noted that the bond sought to address only the short-term needs of the country.

It, therefore, stressed the need for medium-to-long-term measures to address the challenges confronting the economy.

For its part, GUTA said excessive borrowing by the government painted a gloomy picture of the country's economic future.

According to the association, borrowing from internal and international markets was not the surest way to get the country out of the current economic challenges.

Rather, it said, the proper regulation of foreign companies in the country, encouraging exports, creating a favourable business environment, cutting waste in the system and scrutinising government expenditure were some better ways to deal with the issues.

Background

Ghana's fourth Eurobond was successful with a $1billion deal at a coupon rate of 10.75 per cent. It was oversubscribed with | orders exceeding US$2 billion, compared I to a target of US$1 billion.

"This represents an oversubscription of more than 100 per cent, indicating the high appetite for Ghana's credit," a statement issued by the Ministry of Finance said.

The bond was issued after an eight-day roadshow that took the Ghana team, led by Mr Seth Terkper, the Minister for Finance, and Dr Henry Kofi Wampah, the Governor of the Bank of Ghana, to London, Los Angeles, San Francisco, Boston and New York.

Long-term solutions needed

In his reaction, the President of the AGI, Mr James Asare-Ad jei, told the Daily Graphic that the numerous challenges, including the high cost of doing business, high interest rates, high lending rates, the depreciation of the cedi and the energy crisis, were so many to be covered by $1 billion.

Consequently, he said, industries expected the government to find realistic medium-to-long-term solutions to transform the economy.

Going forward, he said, it was the expectation of industries that the government would build the capacity of local businesses by making capital and other viable systematic structures ; available to enhance the growth of local j industries.

Too much borrowing

The President of GUTA, Mr George Kweku Ofori, on the other hand, said borrowing excessively, as Ghana was doing currently, put pressure on the government, especially when the loans were not used for the intended purposes which would yield profit.

He said taking a loan which would be I used to pay off debts and a small percentage used for developmental projects would not yield any meaningful j profit but rather put unnecessary pressure on the government.

That situation, Mr Ofori said, coupled with current poor economic indicators, including the depreciation of the cedi, high interest rates, high inflation and the energy crisis, did not only dwarf the economy but also discredited Ghana on the international market

Regulate foreign companies.

Again, he said the poor economic parameters had already made the economy unattractive to foreign investors and also crippled local businesses, contrary to Mr Terkper's assertion that "many new investors have participated in the transaction, enabling Ghana to expand its investor base"

He argued that paying off huge amounts of arrears and debt to foreign companies which mostly woe given government contracts also had serious implications for the economy.

On the effects of internal borrowing on local businesses, Mr Ofori explained government borrowing from local banks denied local industries and businesses the opportunity to access loans at the banks because the banks preferred giving loans to the government to giving them to business people.

"Our sector is guided by the economy and so if the needed infrastructure and systems are not conducive and favourable, definitely our work is greatly affected," he added.

He, therefore, called on the Ghana Investment Promotion Centre (GIPC) to regulate foreign companies to ensure that they did not repatriate so much money out of the country.

The government should also help build the capacity of local businesses to take up some of the projects and contracts given to foreign companies.