Borrowing Cheap with Zero Coupon Bonds: Three Caselets
| Case Code: FINC181 Case Length: 8 Pages Period: 2019-2021 Pub Date: 2021 Teaching Note: Available |
Price: Rs.200 Organization: Government of Ghana Industry: Government Countries: Ghana Themes: |
Abstract Case Intro 1 Case Intro 2 Excerpts
Caselet 1: Ghana Issues Zero Coupon Bond (ZCB) To Fund Its Economy
In 2021, Ghana was the second-largest economy and second most populous country in West Africa. The country had a ‘B’ credit rating from Fitch Ratings Inc. , ‘B3’ fromMoody’s Investors Service , and a ‘B –’ from S&P Global Ratings . Ghana was facing a tough time in early 2021 due to the Covid-19 pandemic and an interest payment burden which consumed more than 50% revenue of the Government of Ghana (GOG). Experts pointed out that the Ghanaian economy was at a critical stage as the average interest payment burden viz-a-viz government revenue was 11% in the other countries with similar credit ratings (Refer to Exhibit I for selected Economic indicators of Ghana). Charles Adu Boahen, Deputy Finance minister in the GoG, said, “Given our elevated debt levels and interest expense due to Covid-19, it seemed like a good time to create fiscal space and to drive domestic interest rates down by reducing demand locally.” ..
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