Minister for Finance Mr Ken Ofori-Atta has dismissed reports that government is considering the option of returning to the International Monetary Fund (IMF) for some financial support to help stabilise the economy.
Government, he stressed, will consider other options to recover the economy from the ravages of COVID-19 pandemic.
Some economists and financial analysts have predicted that the country will secure a programme from the IMF to help deal with the current revenue pressures and rising debt stock.
National Democratic Congress (NDC) Ranking Member on Finance Committee of Parliament, Dr Cassiel Ato Forson, recently urged government to, as a matter of urgency seek debt relief from the IMF to curb the country’s rising public debt.
However, in an interview with Citi Business News, Mr Ofori-Atta noted that government will rather consider going unto the Eurobond market.
“Absolutely not. We’ve gone to the Eurobond market, I guess 4 out of the 5 years since we came and those are always alternatives that we consider”, he reiterated.
Mr Ofori-Atta said the government is looking at issuing Eurobond in 2022 to deal with the finding gap.
He added that this is an option being considered by government together with other initiatives.
Mr Ofori-Atta indicated the Akufo-Addo administration is also committed to putting in place measures to improve revenue mobilization, whilst dealing with budget overruns going into the next year.
2015 IMF bailout
In 2015, NDC administration led President John Dramani Mahama turned to the IMF for some policy support programme that came with some $918 million for the country.
Some market watchers have argued that, the 2022 budget presentation may hold the key in helping to bring back investor interest in our bonds, after recent exits, due to concerns about Ghana’s fiscal situation.
Debt stock
The latest Summary of Economic and Financial Data from the Bank of Ghana indicated that the country’s total public debt stock as at the end of May 2021, stood at GH¢332.4 billion, an increase of almost GH¢30billion from a previous GH¢304.6 billion recorded at the end of the first quarter of 2021.
The new debt figure brings Ghana’s debt to Gross Domestic Product (GDP) ratio to 76.6 per cent as of the end of May.
At a recent Policy Dialogue on the Economy organised by the Minority Caucus in Parliament, Dr Ato Forson, described the country’s debt stock sustainability as worrying.
He said the IMF Debt Sustainability Analysis (DSA), in 2019 prior to the outbreak of the COVID-19 pandemic; put Ghana at a high risk debt distress, adding that the situation was likely to worsen this year if government did not take a relook at its borrowing plans.
The former Deputy Minister of Finance under the erstwhile NDC government also noted that even though Ghana had not been declared as a Highly Indebted Poor Country (HIPC) by the Bretton Woods institution, the debt sustainability indicators showed that the country was heavily indebted.
“Comparing the debt sustainability indicators in the year 2020 to those in the year 2001, when Ghana was declared HIPC, it is clear that 2020 indicators are worse than those in 2001, even though the debt to GDP indicator shows an improvement,” he added.
Consequently, Dr Ato Forson advised government to seek immediate assistance from the IMF to ensure that the rising public debt was halted.
“We expect the Akufo-Addo/Bawumia government to seek an urgent debt relief from the IMF through the newly proposed Debt Relief Initiative known as the Common Framework for Debt Treatment beyond the Debt Service Suspension Initiative (DSSR) which can be likened to HIPC.
“We also submit that failure by the Akufo-Addo’s government to do so as recommended will mean that within 18 months from today, Ghana will be exposed to a high risk of default on its debt service obligation, which will plunge this country into a deeper economic crisis,” Dr Ato Forson maintained.
Bond market
Earlier this year, Ghana headed back to the international market to free up cash and buy back expensive domestic debt for as much as $5 billion this week, including Africa’s first zero-coupon dollar bond.
Minister for State at the Ministry of Finance, Charles Adu Boahen, explained that the zero-coupon debt would help the country to limit interest payments over the four-year term.
He noted that rates as high as 19% on domestic bonds makes debt-service costs “so high” in comparison with dollar debt.
The average weighted interest rate on the country’s domestic debt stood at 17.2% at the end of 2020 compared with 5.3% for external debt, according to the finance ministry.
“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,” he added.
Yields on the country’s $1 billion of 2030 bonds climbed two basis points to 6.77% at 1:24 p.m. in London Monday, after rising 29 basis points last week.
