Seth Terpker, Finance Minister.
Seth Terpker, Finance Minister.

This would end up reducing the stock of domestic debts, especially, debts that are due in the year 2015 and ease the borrowing space for private sector.

Seth Terkper
Seth Terkper

The Minister made this disclosure during a press briefing on the recent 1.0 billion dollars Eurobond issued at a rate of 10.75 billion percent with tenure of 15 years.

“The entire one billion dollars is supported by World Bank guarantee. And that also means that in line with the original agreement we are going to be using the entire one billion dollars for refinancing our domestic debts only,” Terkper stated.

Although the parliament of Ghana gave approval for government to secure 1.5 billion dollars in Eurobonds but due to market conditions the government decided to accept only one .billion dollars although the bond was oversubscribed by 100 percent at a yield of 10.75 percent.

“If you took 1.5 billion because it was over-subscribed the interest rate is higher and so there was a judicious decision to take only one .billion dollars,” Terkper explained.

The minister stressed that the government’s debt management policy which includes long term financing for capital projects: which could be loans from world bank, African Development Bank , from China Development Bank(CDB) or wherever source, to finance capital expenditure, is a policy that is going to remain.

According to him, the government may in the next two years trade the remainder (500 million dollars) of the 700 million dollars 2017 bonds due in the next two years on the market or use money from the sinking funds, which receives part of the excess petroleum revenue to take it off.

He expressed optimism that the country’s debt-to Gross Domestic Product (GDP) ratio would reduce as the economy continues to grow on target as projected by the International Monetary Fund (IMF)., while more of the country’s gas fields begin to produce.

Ghana’s GDP was revised upwards from the 3.5 percent in the first quarter, to 4.1 percent at the end of the second quarter, and expected to grow at 5.9 percent next year and shoot upwards subsequently.

”So even if during the period of growth we are able to slow down the rate of accumulation of debt , if we continue that rate of accumulation of debt, it means that as GDP grows your debt-to-GDP ratio will go down,” the minister noted.

Head of Debt Management Division of the Ministry of Finance, Samuel Arkhurst attributed the difficulties in the bonds market, primarily to the developments in the economies of the United States (US) and China.

“While the U S economy is experiencing recovery, the second greatest economy (China) is also having a down-turn. Now when you have the biggest economy and the second largest moving in opposite directions, in terms of economic recovery, the head winds affect emerging markets with very severe consequences,” Arkhurst argued.

He however expressed optimism of Ghana’s fiscal situation with positive occurrences in some of the indicators.
Beside containing the budget deficit, the primary balance which is an expression that includes arrears, interest payments and takes current revenue against current expenditure, and for the first time since 2006 we are having it in surplus , said the director.

“We seem to be creating a lot of foreign assets now which is good for the country to be resilient against worsening global financial developments we are having it in surplus,” Arkhurst added. Enditem.

Source: Xinhua

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