Dr. Frank Bannor, Development Economist and Head of Research at the Danquah Institute has raised concerns over the borrowing practices during the tenure of former President John Mahama, particularly in relation to the issuance of Eurobonds.
According to him, the terms of borrowing under the National Democratic Congress (NDC) administration were often unfavorable to Ghana, characterized by high interest rates and short repayment periods.
Dr. Bannor, who is also a lecturer at GIMPA Business School, contrasted this with the New Patriotic Party’s (NPP) more strategic approach to borrowing, which focused on securing lower interest rates and longer repayment terms.
Setting records straight
Speaking on the differences between the two administrations, Dr. Bannor noted that during the NDC government from 2013 to 2016, Eurobonds were frequently issued with steep interest rates. One of the most significant examples, he said, was a Eurobond issued in September 2015 at a coupon rate of 10.75%, the highest in Ghana’s history.
He said this bond, issued under Mahama’s leadership, reflected the challenging borrowing conditions Ghana faced at the time, leading to criticisms over the country’s debt management strategy.
“In contrast, the NPP administration under President Akufo-Addo issued a Eurobond in May 2018 with a much more favorable 8.625% coupon rate, and with a 30-year term, set to mature in 2049. This was a significant improvement in terms of interest rates and repayment periods,” Dr. Bannor stated.
He explained that this long-term borrowing approach aligns with the NPP’s “smart borrowing” strategy, which prioritizes renegotiating terms to secure better deals for the country. Dr. Bannor further pointed out that President Akufo-Addo’s government issued Eurobonds four times between 2018 and 2021, but since 2022, there has been no new issuance. This, he indicated, reflects the NPP’s focus on debt management by reducing the frequency of borrowing and ensuring that when loans are acquired, they come with more favorable terms.
“This approach allowed the government to repurchase existing bonds at better terms, contributing to a more stable debt structure for Ghana,” he added.
First Eurobond
Dr. Bannor also drew attention to Ghana’s first Eurobond, issued under President John Kufuor in October 2007, which had a 8.5% coupon rate with a maturity period of 10 years.
He stated that this bond was set to mature in 2017. In 2016, however, the Mahama administration issued another Eurobond with a coupon rate of 9.25%, which was due for repayment in 2022, with similar unfavorable terms. He emphasised that when evaluating loans, both the interest rate and repayment period are crucial considerations, and under Mahama, the high rates and short repayment periods placed a heavy burden on the economy.
Mismanagement under Mahama
Turning to other major financial agreements under the Mahama administration, Dr. Bannor cited the controversial $510 million AMERI power deal, signed in 2015, as another example of costly borrowing decisions. The deal, which involved the installation of 10 GE TM2500+ gas turbines to address Ghana’s energy crisis known as ‘Dumsor,’ was heavily criticized for its high cost compared to similar projects in other countries.
Dr. Bannor highlighted how Egypt, in contrast, signed a Power Purchase Agreement to build a 1800 megawatts (MW) power plant at a total cost of $1.3 billion. This he explained that while Egypt was paying about $722000 for a megawatt of power, Ghana on the other hand was paying a little over $2 million for a megawatt of power.
In his view, Egypt’s deal was far more cost-effective and sustainable. He further recalled how the World Bank Country Director, Frank Pierre Laporte, also criticized the Power Purchase Agreements (PPAs) negotiated under Mahama’s administration, calling it “wrong and expensive,” and emphasisng the need for an urgent review of the country’s borrowing and spending habits during that period.
