Finance Minister Ken Ofori-Atta says that Ghana’s borrowing habit is not detrimental to the economy but rather a necessity if the country wants to transition from an import-driven economy to an export-driven economy.
This according to him is because Ghana does not have all the funds to push such an ambitious agenda, hence the need to borrow.
“I think we’re at 60 percent if you include our energy and financial services intervention you axe that and you’re around 58, 59%. The challenge really when you look at the Asian countries, etc is not that you shouldn’t borrow.
“How do you then move to an export-driven economy such that our net international reserves coverage is not four months but its two years or it’s three years so that the vexing issue of currency depreciation does not occur?” he said.
A new International Monetary Fund (IMF) staff report has said Ghana is closer to being classified as a high debt distressed country which signifies that the IMF is concerned about the country’s ability to honour its international obligations.
The public debt stock as at September 2019 was pegged at GH¢208.6 billion, equivalent to 60.3 percent of the country’s gross domestic product (GDP), data from the Bank of Ghana revealed.
The 2020 budget sets aside over GH¢19bn to pay interests alone and is one of the biggest items on the government’s expenditure bill.
However, the Finance Minister speaking in an interview said, the classification should be no cause for alarm. According to him, the issue the IMF is trying to raise is not to shy Ghana away from borrowing, but rather to ensure that the country borrows with care.
“I think the issue is not that we should not borrow; we should borrow with care and if you look at our bit surplus, for example, were around 2billion dollars net. So your challenge is to get appropriately priced funds at the right time to be able for you to do your transformation exercise which will then generate your resources,” he explained.
He said, just like any other country, Ghana borrows because it wants to “inject resources into the economy with the expectation that that will enhance productivity.”
Touching on the Eurobond Roadshow the government had embarked on, the Finance Minister, Ken Ofori-Atta said it had been a great success.
“This time around it was 3billion dollars and we got a 15billion dollar response from the international capital market which as you rightly said is three times what we wanted and the lowest rates in our history.”
“Then we decided to test the market with the longest bond in Africa’s history which was 41 years and amazingly, that one we took 750million dollars from that, that one had an 8-times oversubscription. This is really indicative of the confidence that the market has in how we’re managing the economy and how things are going,” he concluded.