The minute you send Rwanda or Ghana your money, it’s gone. But you won’t know it for awhile.
Rwanda is borrowing foreign currency – US dollars – offering a tempting 7% interest. But the likelihood of getting principal back is zero, though the country will probably pay some interest while the game is alive. Most likely, the gov’t will use part of the principle to pay interest to the bond purchasers, and the rest to buy imports and fund itself. When the money runs out, Rwanda will default. It cannot print new US dollars like the Federal Reserve can. Besides borrowing, the country has no access to dollars. Same deal with Ghana.
Last week it was Rwanda issuing USD-denominated debt at 7% (lower than Spain yields less than a year ago) just as bond yields of 90% of global sovereign bonds are at or near all time lows.
And now, moments ago, we just learned that Ghana (nominal 2013 GDP: $42.8 billion) has just upsized its dollar-denominated $750MM bond issue to $1 billion.
We can only assume that this is due to unprecedented demand for yield. Any yield.
Ghana is inviting bids for advisers on transaction, according to information from two people with knowledge of the plans, who asked not to be identified because details aren’t yet public.
Govt plans to sell debt by end of yr: Albert Kofi Asamoa-Baah, an adviser at finance ministry, says by phone, declining to comment on size of offering.
Well, it finally happened