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Business news for Monday, September 7, 2020
Source: www.ghanaweb.com
2020-09-07
Former Finance Minister Seth Terkper
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Former Finance Minister Seth Terkper has said that the Agyapa royalty deal shows that the government is trying to implement another unconventional borrowing strategy that will further worsen Ghana’s debt profile.
According to him, the controversial agreement is part of the many unconventional methods that the current government has been applying since it took power that are causing Ghana to become a country with high risk debt problems.
These views were contained in Terkper’s article on the deal.
The Agyapa royalty deal, according to the government, is part of the current government’s strategy to overcome the long-standing problem of lack of capital for development projects.
Critics have said that it is not transparent and that the revenue the government expects from the deal will change the state by at least $ 2 billion.
The former Minister of Finance, who is currently the Lead Partner of the tax firm PFM Tax Africa, revealed in his article that as of June 30, 2020, and based on the most recently published data from the International Monetary Fund (IMF), 8 countries They are in a situation of over-indebtedness, 28 countries run a high risk, 23 countries have a moderate risk and 14 countries have a low risk of over-indebtedness.
According to the data, Ghana is among the 28 countries with high-risk debt problems.
According to a report by norvanreports.com, given that recent estimates suggest that economic growth in Africa is likely to fall from 3.2% to 1.8% in 2020 as a result of the coronavirus pandemic, revenue from Ghana will also decline, which makes the risk of debt distress even higher in the coming year.
According to Terkper, the government has been using these unconventional borrowing methods for the past two years or more, with Agyapa royalties being the newest method being used, as lending options are exhausted at a time when it has made it difficult to access the debt market for funds with potentially high interest rates.
The use of these methods, Terkper said in the article, confirms the high levels of budget deficits and public debt, making it difficult for the government to continue using acceptable instruments or methods to obtain loans from domestic and foreign markets.
The former finance minister believes that the urgency surrounding the Agyapa royalty deal may be due to pressure to finance the budget deficit that is expected to reach approximately 11-13% by the end of the year.
“It seems obvious, after nearly US $ 5 billion of conventional loans that have increased the debt stock (excluding BOG financing which is also considered unconventional), that the urgency surrounding the Agyapa agreement may be due to pressure to finance the budget. The fiscal deficit, indebtedness and debt trends, among others in the financial market indicators, are worrisome, “says an excerpt from his article.
Terkper says that Ghana’s budget deficit and public debt are projected to be between 11% and 13% and between 70% and 73% respectively by the end of December 2020.
“Our own controls show that the IMF and the World Bank found in 2019 that 43 low-income countries were experiencing or were at high risk of experiencing debt-related problems, slightly more than double the number in 2013,” according to the report by norvanreports.com.
Over-indebtedness occurs when a country has experienced difficulties in paying its debt or is very close to doing so, which means that a government has not made a payment or is in the process of restructuring its debt.
Those at high risk are generally countries where the burden of external debt is large enough to cause concern among its citizens and the economic committee.
That can mean falling into a crisis if there are large capital outflows, currency devaluations, or a drop in export earnings, all of which seem likely for low-income countries in 2020.
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