90bn Ghana Debt Is Sustainable - Finance Minister

Minister of Finance and Economic Planning Seth Terkper has described as sustainable Ghana's ballooning public debt which has risen from nine billion cedis to 90 billion cedis in seven years.

Ghana's public debt has risen from nine billion cedis to 90 billion as of May this year - a rate economic analysts and opposition politicians say is simply unsustainable.

But the Finance Minister has parried the criticisms, saying the loans taken thus far have been invested into commercial projects that can repay the loans.

"We are making progress...  Our debt is sustainable. It is not about whether you take debts. If we are going to resolve 'dumsor', our budget cannot resolve dumsor. Let's face it," he said adding the country must change course if it has to deal with some of the power crisis and some of the difficult challenges facing the economy.

He was speaking on Joy FM's Newsfile programme on Ghana's increasing public debt.

The Finance Minister only last week presented a supplementary budget to Parliament asking for the approval of some 865 million cedis part of which will be used to prop up the cedi.

The House also approved the issue of a Eurobond that will raise an amount of $1.5 billion, which would increase Ghana's debt profile.

The Minority has been grumbling over what it says is the excessive borrowing by the government.

They fear at this rate of borrowing Ghana could head to the Greece debacle of a debt-to-GDP ratio of 180 percent. But speaking on Newsfile, Seth Terkper discounted any such fear.

He said government has "changed course" and has devised "new strategies", including the World Bank guarantee to properly structure its loan profile.

He said much of the loan taken so far have been invested into commercial projects such as the Ghana Gas project, the Bui and the Kpong Dam projects that will generate sufficient cash flows to service the loans.

He said the Akosombo Dam for instance paid for the loan that was taken to build it - something that demonstrates loans properly invested cannot be bad for the economy.

1.5 billion dollar Eurobond

Seth Terkper berated the erstwhile New Patriotic Party government for not making any repayment plans for the 750 million Eurobond it took in 2007.

According to him, 500 million out of the $1.5 billion Eurobond approved on Thursday to be issued would be used to refinance the Eurobond debt Kufuor's government failed to plan for.

"When you replace a debt with a debt you are not increasing your debt," he said but was quick to admit that, that policy was not sustainable.

He said as part of a more reliable strategy to ensure that the country does not wait for a decade before paying its Eurobond debt, government is revising the petroleum management fund out of which a sinking fund would be created to pay those debts every year rather than having to wait for ten years.

Seth Terkper said the loans have been invested well and within the medium to long term, the country will reap the full benefits.