The Minister of Finance, Seth Terkper, has defended government’s decision to use the Sinking Fund created from excess oil revenue to buy back the 2017 bond it issued at the European Bond Market.
The minister said the move, which formed part of the government’s debt management strategy in the medium term, was a bold initiative to whip up investors’ confidence in the economy and ensure that the country did not become a Highly Indebted Poor Country (HIPC).
He said the government had spent US$33 million from the Sinking Fund created with excess proceeds from the Stabilization Fund (part of oil revenue) to buy back the bond from the secondary market, because the interest on it was unsustainable.
Addressing the media at the Meet-the-Press series, jointly organised by the Ministries of Finance and Petroleum in Accra yesterday, Mr. Terkper explained that investors would be skeptical about the economy if the government did not implement such initiatives to manage its external debt.
“Debt is one thing our investors are very concerned about. Aside that, we do not want to see the country going back to HIPC,” he said, and added that the one sure way to address the issue of escalating debt was to utilise the Sinking Fund to manage the country’s external debt.
The decision to use inflows from Sinking Fund to buy back the Eurobond was nothing new, the minister said, and cited Philippine as one of the countries in the world, which had benefitted from that initiative.
The Finance Minister indicated that a research had gone into the initiative by experts from his ministry, and expressed optimism that the country would reap the benefits in the medium term.
He pointed out, however, that the Sinking Fund would be funded continuously from future oil revenue savings.
Mr. Terkper gave the assurance that the country’s debt to GDP ratio would not go beyond 70 per cent by the end of the year, and expressed the government’s commitment to work towards achieving its medium term target of 55 per cent to 60 per cent debt to GDP ratio.
He also announced that the government would reduce its borrowing from the domestic market, to reduce the pressure on the interest rate.
The minister said the private sector would be given the space to borrow from the financial market at a very low interest rate to enable the sector increase productivity and create employment.
“Government will be less and less on the domestic market so that the banks can channel their resources to finance the private sector,” he said.
The minister said it was the goal of the government to build a resilient economy for growth, create jobs and boost the private sector.
He said, a number of legislations had been amended and revamped to support government’s policies and strategies and commended Parliament for spending time to scrutinise the amendments and passing them as new legislations.
Mr. Terkper reiterated the government’s commitment to resist the temptation to overspend in this election year and stick within the macro-economic targets set for the year.
Touching on the government’s net freeze on employment policy, he said the policy did not include the education and health sectors as alleged by some government critics.
He said the policy was more of rationalising the staff on government’s payroll than a decision not to employ to fill vacant spaces.
By Yaw Kyei