In a bid to defray Ghana\u2019s huge accumulated debt, government has announced the establishment of a fund called the \u201cSinking Fund\u201d to help it achieve that goal.<\/p>\n
[contextly_sidebar id=”OgrSJVFn0CaSE0uhpq4HukbjGTrznHLx”]The fund is to enable government to start paying Ghana\u2019s ten year bond on an annual basis.<\/p>\n
According to the Minister of Finance, Seth Tekper, the repayment will be spread over time to enable the country have a financial discipline of paying for principal and interest on standard loans borrowed.<\/p>\n
The move has been necessitated by a mechanism in the petroleum fund which allows for a cap to be placed on the stabilization fund while the excesses will be used to establish either a contingency fund or \u00a0part will be used to pay debts only.<\/p>\n
Its part of fiscal discipline<\/strong><\/p>\n Speaking at the Stakeholders Forum on the IMF Program, Mr Seth Terkper said the move is part of a fiscal discipline regime to manage the country\u2019s debt stock.<\/p>\n He explained that \u201cwhen we borrow from CDB, EXIM, all the EXIM US or China, what we do is that we pay the principal and the interest. Now we have found a mechanism in the petroleum fund, which says that when you cap the stabilization fund, the excess can be used for two purposes only.\u201d<\/p>\n It’ll be funded with excess cash from contingency fund \u00a0<\/strong><\/p>\n \u201cThe first is to use to establish the contingency fund which we started to establish under the constitution\u2026we have put boulders amounts in it. The second one is that you can use part of that excess to pay down only debts and another feature is that when Bank of Ghana finances, it does not pass dividends directly to government, the dividends is used to pay down borrowing from the bank,\u201d he added.<\/p>\n The Finance Minister indicated that government intends to \u201cuse that excess amount to establish the Sinking fund to start paying down our ten year bonds on an annual basis. \u00a0\u00a0When we do that, then we spread the repayment over time then we get the discipline of paying for both principal and interest.\u201d<\/p>\n \u201cWe know there is some controversy on this but the Philippines do it, our colleagues in Cameroon do it, Gabon do it,\u201d he added.<\/p>\n Gov’t debt stands at $88.2 billion<\/strong><\/p>\n Government has been widely criticized for its growing appetite for borrowing.<\/p>\n According to the Bank of Ghana, as at March 2015 the country\u2019s current total public sector debt stock stood at GH\u00a288.2<\/strong> <\/a><\/span>which represents 65.3% of Ghana\u2019s Gross Domestic Product (GDP).<\/p>\n –<\/p>\n By: Godwin Akweiteh Allotey & Lorrencia Nkrumah\/citifmonline.com\/Ghana
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