The Finance Minister, Seth Terkper has talked of government’s concern for the country’s rising public debt stock, hoping implementation of the public debt strategy will help mitigate the impact of government’s incessant borrowing habit.
Mr. Terkper, speaking to newsmen after the issuance of the third Eurobond, said government is fully aware of the rising debt situation -- which stood at some GH¢58.4billion as at March, 2014.
Total stock of public debt (domestic and external) was up from GH¢52.1billion at the end of December 2013. Of the total, the domestic debt component was GH¢27.8 billion (47.5%).
According to Mr. Terkper, as a country that was once declared a Highly Indebted Poor Country (HIPC), government has put in place measures which will place the debt stock within sustainable levels.
The National Debt Management Strategy, he said, is government’s direct response to managing the situation, allowing loans borrowed for capital projects to be repaid by revenue from operating the facilities.
“The strategy is that when the state borrows for a project, the state-owned enterprise utilising the facility should be made to contribute to the loan’s repayment.
“Traditionally, loans were sourced for these state-owned enterprises’ projects and no effort was made to repay; that will be a thing of the past as government has now decided that proceeds accruing from such facilities will be taken upfront for loan-repayment.
“For example, the Atuabo Gas Processing Plant and all the CDB loan projects were designed with the debt strategy in mind. We are already taking three on-lending agreements to parliament,†he added.
Mr. Terpker’s response comes in the wake of government’s third Eurobond which raised US$1billion at a coupon rate of 8.125%. After a turbulent year for the economy, many analysts predicted that yields on this year’s bond will not fare better than the 7.875% government got for its second Eurobond in 2013.
The cedi since the turn of the year has depreciated against the US dollar by about 40%, pushing the country to a point where it needed the IMF’s help to stabilise the currency, boost confidence in government’s policies and accelerate the journey to restore economic stability.
The imminent IMF assistance programme will be two years after the country completed its last stabilisation programme with the Bretton-Woods lender.
Financing capex
The Finance Minister explained that US$750million of the Eurobond money will be used for capital expenditures, refinancing and counterpart funding requirements; while an additional amount of about US$250million will provide seed-capital for the Ghana Infrastructure Investment Fund that is scheduled for launch in January 2015.
By Richard Annerquaye Abbey | B&FT Online | Ghana
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