Q1 2021: Parliament approves government's request to borrow US$3 billion

Parliament has approved a request by the government to raise US$3 billion as part of its 2021 International Capital Market Funding Programme.

The amount is expected to be used to support growth-oriented expenditures, re-profile domestic debt, and to conduct liability management of refinancing all or part of the 2023 sovereign bond with an option to raise it by a further US$2 billion.

Should market conditions prove favourable, the amount would also be used for liability management for the 2026 and 2030 sovereign bonds and a further domestic debt re-profiling.

Moving the motion for the approval of the programme on the floor of Parliament, in Accra, yesterday, Chairman of the Finance Committee, Dr Mark Assibey-Yeboah, said the proposed bond programme would enable government address challenging capital market conditions, which have been impacted negatively by the Coronavirus Disease 2019 (COVID-19) pandemic.

He said the proceeds would be used to finance growth-oriented expenditure in the 2021 budget to the tune of US$1.5 billion, and the rest to re-profile domestic debt.

Dr Assibey-Yeboah, who is also the Member of Parliament (MP) for New Juaben South, told the House that the committee was informed that “government’s objective is to ensure the financing of the 2021 budget at a possible least cost and at a prudent degree of risk. The timely approval of the instant request will give the government an increased chance of achieving that objective on the international market.

“Mr Speaker, the committee, having carefully scrutinised the programme, recommends to the House by a resolution to adopt the committee’s report and approve the programme”, he submitted.

Speaking in support of the motion, Mr Haruna Iddrisu, the Minority Leader, and MP for Tamale South, said there was no clarity on how much government intended to raise on the market in 2021.

“Mr Speaker, what are we approving? Three billion or five billion? But if you read the committee’s report, it means the government intends to borrow US$5 billion,” he observed.

The amount, Mr Iddrisu said, would add to the country’s debt stock which “already positions the country as a debt risk distress country.”

The debt, which the International Monetary Fund (IMF) pegs at GH¢297 billion as against the Finance Minister’s figure of GH¢276 billion as of August, he said, meant that each Ghanaian per capita owes GH¢9,900, which means that “we will need to spend more on debt servicing than infrastructure and spurring the private sector to grow.”

He said with debt servicing to cost Ghana GH¢24 billion in 2021, the next government would have a big financial hole to fill.

The Minority Leader said both the IMF and the World Bank approve of government borrowing but same must be done responsibly and to invest in areas that spur growth and employment.

Mr Iddrisu said government’s claim that it has better managed the economy, was a fallacy because among other indicators, the exchange rate has worsened, with debt to Gross Domestic Product (GDP) ever rising.

But, the Minister for Monitoring and Evaluation, Dr Anthony Akoto Osei, disagreed that the proposed amount would add to Ghana’s debt.

“You are borrowing to replace a much expensive debt with a cheaper debt. All I hear is to re-profile such that you end up saving the country some money. We are helping Ghana have a lesser debt,” he explained.

Dr Osei accused the Minority of engaging in propaganda because whilst in power in 2016, the government borrowed at 10.75 per cent and borrowed another at 8.5 per cent to retire the expensive one.