On 28th February, 2020’ The Ghana Securities Industry Association (GSIA) through its president circulated to its members indicating payment arrangements to Fund managers(FM). The circular indicated a total of Ghc5billion of which Ghc4billion is in bonds .
This arrangement implies 80% payment is in bonds while 20% is in cash. This will improve liquidity only marginally.
Point 6 of the circular raises some questions. The introduction of the circular made it clear that the payment arrangement is 20% cash and 80% bond implying that the FM and investors are making compulsory or imposed investment for 5years with no coupon payment using 80% of cash due them today. Point 6 States that “the Ghc4billion is likely be a 5 year zero coupon tradable bond.”.There should be certainty whether or not the bond will be tradable. This means the association is not sure about the “tradability” of the bond. If it is not going to be a tradable bond then liquidity for investors . Institutions, banks etc whose monies are locked up can not redeem the 80% until maturity of 5 years and will therefore not activate enhanced liquidity. Meaning the liquidity profile of the financial system from the perspective of the payment of locked up funds will not change.
However. , if bonds are tradable and there is good market sentiment for the bonds there maybe enhanced liquidity from the payment plan.
Emphatic yes or no as to whether or not the bonds are tradable is important for planning and budgeting .
