Ghanaians urged to support government’s debt management policies
Minister of Finance, Seth Terkper has urged Ghanaians to give full support to the government’s Sinking Fund, Buy Back, Debt Service Reserve and Amortization policies.
He said they are healthier ways of financing development over a sustainably long time on the capital market.
He said the implementation of these policies would help avoid significant ‘roll-over’ risks in the future.
Delivering the Mid-Year Review of the Budget and Economic Policy in Parliament, he said this mode of financing is the practice in Middle- Income and Advanced countries.
“Accordingly, the FAA’s Sinking Fund provisions are being enhanced in the proposed PFM Bill that is currently before this House,” he stated.
Parliament approved the setting up of a Sinking Fund in 2015, from funds above the Cap on the Public Revenue Management Act Stabilisation Fund, aimed at periodically redeeming the country’s external and domestic debt, especially current bullet loans and had accumulated about $100.0 million as at April 2016.
Mr Terkper said government, under Eurobond “buy-back” programme-repurchase of outstanding bonds under favourable market conditions, had used a portion of the Sinking Fund proceeds to redeem $30.0 million of the Sovereign Bond issued in 2007, incrementally from the markets, leaving about $500.0 million to be redeemed by October 2017.
In order to redeem the outstanding amount, the minister proposed some measures to be undertaken.
These include raising funds from Capital markets, if favourable, and using part of the proceeds to redeem the Bond, as stated in the 2016 Budget; or dedicating the balance of the Sinking Fund, as buffer, in a programme to redeem the Bond, if markets are not favourable.
He also proposed to boost the buffer by using part of the $233.5 million of the remaining balance of the 2015 Bond proceeds (which is wholly dedicated for refinancing our debt); and increase the buffer even more by reviewing the cap on the Stabilisation Fund to $100.0 million to enhance the flows into the Sinking Fund.
“In line with proposals approved by this House, the excess amount over the Cap will be transferred into the Sinking Fund and Contingency Fund, with a portion remaining to increase Stabilization Fund” he said.
He said the short-term target was the 2017 Bond while the medium term focus is to use the Sinking Fund to manage all domestic and external Bonds and not to wait for them to mature before seeking to refinance them.
The ministry also recommended the extension of the 2016 bond issuance advisers to 2017, informed by the risk posed by a likely unsuccessful roll-over or buy-back of the 2007 Bond—and further by follow up events in 2017, post-election Budget presentation, and assured investors of Ghana’s commitment to the markets, despite political events in the country.
Source: GNA