The Institute of Fiscal Studies (IFS) has rubbished government’s new policy to allow state agencies to borrow based on the strength of their books describing it as ‘proxy borrowing’ by government.
[contextly_sidebar id=”R8nGSwirIAmYuaPz7L1Y1HVsKB2aOdVh”]This comes a few days after the Ghana National Petroleum Corporation (GNPC) announced that it will finalize a deal to borrow close to 400 million dollars in the next few weeks.
Finance Minister Seth Terkper in the 2015 budget said” as part of the new debt management strategy approved by this house, we will continue to enhance the use of oil and gas resources to leverage the Capital Markets for development of the energy sector”.
“… GNPC’s recent successful access to the capital markets to raise US$700 million to support infrastructure development. I would like to emphasize that this loan is a GNPC loan and not a central government loan. The cost of borrowing at around 5 percent is highly competitive. “, he added.
GNPC’s Chief Executive Officer Alex Mould in a recent interview with Citi Business News said GNPC will borrow less than the 700 million cedis because of the drop in oil prices at an interest rate of about 3.9 percent.
According to the IFS any default by the company would mean government as the final guarantor will offset the debt.
“there have not been a proper restructuring taking place…for those State enterprises to be able to put money into the debt retrenchment fund they have to perform first , with the current situation we believe that if nothing is done to the state enterprises, nothing will change and the money they’ve borrowed will be a contingency on the government”, the Executive Director of the IFS Professor Newman Kusi said.
He said the proxy borrowing by government will only increase the country’s debt levels.
Government borrowed 24.2 billion cedis last year increasing the country’s total debt to 76.1 billion cedis at the close of that year.
By: Rabiu Alhassan/citifmonline.com/Ghana