Seth Terpker, Former Finance Minister of Ghana
Former Finance Minister, Seth Terkper, has stated that the country needs to re-finance its economy by taking advantage of the stabilization fund available to enable the country to reduce its borrowing level.
This comes on the back of Moody’s report which indicated that the country will find it expensive to borrow to run its economy due to a decline in revenue and an increase in interest costs.
In an interview with GhanaWeb’s Amos Ekow Coffie, Mr Terkper said the country has been in similar situations before and it is time the policy on borrowing reviewed and structured to help the country overcome the difficulties in borrowing.
“We have been there before like twice already, our debt became unsustainable because it was difficult for us to borrow at a cheaper rate so we got debt relief, then after that our debt got to about 70%, it crossed 60% to 65% by the time I came to office we were heading towards 70% and that is the reason we set up the sinking fund and the reason we get to this point is that when you take most of the domestic borrowing, whether it is treasure bill or Bank of Ghana bond we don’t pay down, we just refinance and when you refinance we go into the rollover risk, ” he said.
Listen to the full interview below
Meanwhile, in Moody’s latest assessment of the Ghanaian economy, it ranked the country B3 with a negative outlook, explaining that Ghana has high exposure to external financing.
“The negative outlook reflects the rising risks that the pandemic poses to Ghana’s funding and debt servicing due to its exposure to shocks from a high dependence on external financing,” said Kelvin Dalrymple, Vice President – Senior Credit Officer, at Moody’s.
According to Moody’s, the challenge now for Ghana is to implement an austere budget by limiting spending or finding cheaper loans to finance the deficit left by its reduction in earnings.
“That said, our outlook could turn stable if the government limits the potential increase in its funding needs or confidently show it will be able to get sufficient funding at moderate costs, when needed,” Mr Dalrymple explained.
Ghana’s economy, valued at almost US$70 billion, experienced two-quarters of the decline in its Gross Domestic Product in the second quarter and third quarter of 2020 respectively.
Despite that, the economy is expected to grow at a modest 1.0% in 2020.