Ghana gov’t releases $200m of Eurobond proceeds for capital projects

The Ghana government has made available the cedi equivalent of $200 million for the payment of ongoing capital projects in various sectors of the economy to ensure their completion.

The amount is part of the $740 million Eurobond proceeds that have been deposited in the country’s foreign reserve account.

This means that the GH¢400 million has been moved from the reserve account into the Consolidated Fund, ready for effecting payments for work done.

The Minister of Finance, Mr Seth Terkper, who confirmed this to the Daily Graphic in an interview in Accra yesterday, explained that financing the projects would be effected upon the adducing of certificates of work done by contractors.

The projects include the gang of six, comprising the Tetteh-Quarshie-Madina road, the Sofoline Overpass in Kumasi, the Anyinam-Konongo-Nkawkaw bypass, the Ho-Fumey road and the Asankragua-Enchi road.

Other projects are the Sakumono Sea Defence, some agricultural and fisheries projects, electrification projects under the Self-Help Electrification Project (SHEP 4), as well as transportation and social infrastructure projects.

The finance minister added that the funding would also cover the refinancing of domestic debts as they fell due, under the new strategy to extend the tenor of domestic borrowing to channel long-term funding into long-term projects.

The economy recorded a deficit equivalent to 4.5 per cent of Gross Domestic Product (GDP) as of June, this year, financed mainly from domestic sources, according to the Bank of Ghana.

That gave rise to a net domestic financing of GH¢3 billion, lower than the budget target of GH¢3.2 billion.

The domestic component of public debt amounted to GH¢20.9 billion as of the end of June, this year, compared to GH¢18.5 billion in December, 2012. Refinancing of parts of this debt will mean that the interest repayments will come down.

“We will continue the payments from the Eurobond proceeds until the end of the year. If contractors are not able to make available their certificates to access the funding, we will roll over to the following year,” Mr Terkper stated.

He stressed the government’s resolve not to start any new major project because “there are enough projects in the pipeline to be completed before introducing new ones”.

The government has received the approval of Parliament to use 10 per cent of the Eurobond proceeds as counterpart funding to trigger the disbursement of some donor-funded projects.

Thirty one per cent will be directed towards funding projects under the 2013 Budget, with 34 per cent going into refinancing maturing domestic debts. The refinancing of short-term debt instruments will also save the country the payment of high interest rates.

Mr Terkper explained that the first tranche of disbursements would help cushion the cedi because the proceeds in dollars would be converted into the local currency to effect the payments.

In the period January to June 2013, the cedi cumulatively depreciated at a slower rate of 3.4 per cent against the US dollar, compared to a depreciation of 17.2 per cent during the same period in 2012.

In trade weighted terms, the cedi appreciated in real terms by 1.8 per cent, compared to a depreciation of 14.3 per cent last year.

“Since some of these payments are in cedis, the conversion will stabilise the reserve position, as well as the local currency,” Mr Terkper explained, adding that the disbursements from counterpart funds from donors would also reduce the commitment fee burden on the economy.

Source: Daily Graphic