Former Finance Minister, Mr Seth Terkper, has scored the governing New Patriotic Party (NPP) poorly in the payment of government debts as compared to the former National Democratic Congress (NDC) administration.
Mr Terkper said mechanisms such as the Sinking Fund, Infrastructure Fund and other mitigating measures for debt payment put in place by the erstwhile government are not being applied effectively by the current administration.
Referring to the debt management report available on the website of the Ministry of Finance and the 2019 Budget, Mr Terkper said: “Up until 2013, we [government] were borrowing more than we were paying down. That we [NDC] turned this around between 2013 and 2014 and the rate at which we were borrowing giving the Sinking Fund, taking off the first sovereign bond, using the Sinking Fund to also support domestic bonds and others, we started to see the rate of borrowing going down. Which meant that we have found a mechanism, not for all debts but for our bonds [foreign and domestic] to be paid down.”
He added that: “The debt stock which was berated at the end of 2016 and the fact that the rate of borrowing was going downward was ignored, that debt stock has become lower than the debt stock at the end of 2018”.
He said the debt stock at the end of 2016 was “around 56% [but] today it is about 57%”.
Mr Terkper said currently, “the trajectory is an increase, not a decrease that we were doing using the Sinking Fund, that is because the Infrastructure Fund is not being funded, that is because Sinking Fund [is not effective]; the mechanisms for lowering and slowing down the debt are not being applied as religiously as we [NDC] [did]”.
He said the NDC government managed debt payments with limited resources yet with the abundance of resources at the disposal of the Akufo-Addo government, debt management strategies have been appalling.
“This is happening with three oil fields, as against one oil field. We [NDC] did this with one oil field, now we have three oil fields, output has almost tripled and crude oil prices which were in the tanks around $40-$42 at the time we were leaving office are currently at about $63-$64 and shot up to about $86 last year. So, the question is, why are we not using these mechanisms to reduce the debt?” he wondered.
He said he does “not see the debt report, neither do I see the Petroleum Management Revenue Act report nor the PIAC report talking about the Sinking Funds and what is happening to those funds”.
For him, “We are focused excessively on the deficit and I was reading an article, there hasn’t been any reaction [from the current government], that we are actually not paying down arrears and that we have been doing some offsets".
He emphasised that: “Every government borrows; even a government that has a budget surplus borrows strategically to build infrastructure and to pay because your budget surplus is annual”.
However, “when you borrow, you must pay, which explained the [introduction of] Sinking Funds”.
“It is to the credit of all Ghanaians that even when crude oil prices were falling in 2015/2016, we managed from 2014 to put aside over $500 million of our own oil revenue to pay the first sovereign bond that was issued in 2007.
“Out of the $750 million, we used our own oil revenue, by the time we were leaving office we had paid $336 million and we left $200 million in the sinking fund which was used to take off that bond on October 4, the date of maturity without anybody fearing about Ghana not being able to pay for a substantive loan like $750 million and we refinanced the budget”.
“Today, the sinking fund is not being used for the purposes of offsetting the debt so where is it going?” he queried.
“Let’s not accept that every government borrows and it's inevitable to borrow but let’s ask what is the oil revenue that we set aside for managing debt, are we on that path, otherwise we will come to debts haunting us”.
The Bank of Ghana’s latest Summary of Economic and Financial Data has shown that Ghana’s debt stock increased by 21.5 per cent as of the end of 2018 adding GHS30.6 billion to the GHS142.6 billion debt of 2017.
Ghana’s debt stock has, therefore, hit GHS173.2 billion.
The country’s external debt at the end of 2018 stood at GHS86.3 billion.
The domestic component of the total debt stock was GHS86.9 billion.
The two represent 28.9 per cent and 29.1 per cent of GDP, respectively.