Government Directs SOE's To Open Debt Servicing Accounts

Government has directed State Owned Enterprises, to open debt
servicing accounts.

This is to ease the pressure on the state purse. Upon ascension to Lower Middle Income status in 2011, as a result of a re-base of the economy, concessionary loans and grants to Ghana have diminished.

The debt portfolio is expected to increase as Ghana takes
to the commercial window for support.

This was the outcome of a meeting between President John Mahama, some Ministers and representatives of State Owned Enterprises at Peduase Lodge.

The meeting was to update the chief executives on the implementation of the new government policy on debt financing.

President Mahama said state enterprises could not continue to rely on the old ways of doing things, especially, looking up to the government to fund all their activities.

President Mahama also said currently, 10 per cent of all public loans qualified to be repaid by institutions benefiting from such credit facilities.

"This means that in calculating our debt sustainability, we could reinvest 10 per cent in other social projects," he said.

Even in health care, President Mahama said, there were some projects that had the capacity to generate incomes to repay the credits contracted for the purpose.

The Ghana infrastructure Fund (GIF) Bill, the president said, was ready and would be placed before Parliament when the legislative body reconvened.

"It will be a vehicle that would help in the implementation of the new policy being discussed," he added.

The Minister of Finance and Economic Planning, Mr Seth Terkper, said the government was poised to implement the debt management strategy to the letter.

He also said since Ghana had become a lower middle-income country, its access to grants and concessional financing had started diminishing.

"For instance, we can no longer borrow from the World Bank and repay over 40 years. We can only do so in 25 years," he said.

The African Development Bank also has a similar policy, the minister said, and added that "as a consequence, we also have to pay higher interest rates."

According to him, as growth increases, Ghana will have to rely more on commercial loans.

Mr Terkper said a new important element of the new debt-servicing management policy, was to critically look at loans that the country would take.

He indicated that the practice where all government loans were classified as public debts, even when they went into commercial ventures, was no more sustainable.

According to him, there had been successes and challenges with the implementation of the new policy; that was why the meeting with the SOEs was called to find ways of consolidating the achievements and overcoming the problems.

Mr Terkper mentioned that a number of SOEs were doing well in contracting and repaying credits and said many of them had the capacity to contract commercial loans and put them into profitable ventures. He, therefore, advised them to do that to free the government from the troubles associated with debt servicing.

Source: GBC