Graphic Business News

Borrowing by MDAs, SOEs to be regulated

By: Emmanuel Bruce

The government has kick-started processes to develop guidelines that will regulate borrowing by ministries, departments and agencies (MDAs) and state owned enterprises (SOEs).

The guidelines are expected to ensure that MDAs and SOEs borrow within the limit of the annual borrowing plan developed in line with the government’s debt strategy for the medium-term. 

Presenting the mid-year budget review in Parliament last Thursday, the Minister of Finance, Mr Ken Ofori-Atta, said the proposed guidelines were expected to be finalised by the end of this year following comprehensive a stakeholder consultations and feedback.

He said this formed part of measures to control the country’s rising debt stock.

Public debt developments
The country’s gross public debt stock in nominal terms stood at GH¢142.6 billion (US$32.3 billion) as at the end of 2017.

In real terms, the gross public debt, as a percentage of Gross Domestic Product (GDP), declined from 73.1 per cent in 2016 to 69.8 per cent in 201 based on the revised GDP announced in April 2018.

Over the same period, the rate of debt accumulation declined from 22 per cent in 2016 to 16.6 per cent in 2017.

The minister said this was on account of prudent macro-fiscal and debt management policies.

He said the share of external debt declined from 56.3 per cent in 2016 to 53.2 per cent in 2017, whereas that of domestic debt increased from 43.7 per cent to 46.8 per cent over the same period because a large part of the budget financing for 2017 was from domestic sources.

“In addition, as you may recall, we also used a portion of the domestic financing for liability management. The decline in the share of external debt is also attributable to the full redemption of the maturing Eurobond of about US$199 million in 2017,” he explained.

Medium term debt management strategy
Mr Ofori-Atta also indicated that the government would continue the course it began in the 2018-2021 medium-term Debt Management Strategy (MTDS), aimed at extending the maturity profile of the debt portfolio through the issuance of longer-dated instruments to reduce the rollover and refinancing risks.

In the remaining quarters of the year, he said the Credit Rating Team (CRT) of the government would continue to conduct credit risk assessments on public entities in the country and complete assessments for five additional SOEs to ascertain their creditworthiness.

“We will also continue ongoing work to finalise credit risk assessment guidelines to govern credit risk assessment of public entities. Guidelines for the contracting of guarantees and for entering into on-lending arrangements, as well as fee guidelines to inform the charging of guarantee fees will also be prepared and finalised over the medium-term,” he said.

Over the medium-term, he said the government would continue to carry out its mandate of managing the public debt at the lowest possible cost and subject to prudent levels of risk by conducting debt sustainability analyses and revising the medium term-debt strategy to guide borrowing. — GB