Finance Ministry refutes IEA’s debt analysis

Accra, Feb. 23, GNA – The Ministry of Finance has refuted the Institute of Economic Affairs’ (IEA) assessment of Ghana’s public debt situation.

The IEA warned last week that Ghana’s public debt could grow to about 70 per cent of gross domestic product (GDP) by next year.

A statement issued by the Ministry and signed by Mr Seth Terkper, the Minister of Finance, said the IEA’s claims have ‘positive aspects’ but also contain ‘several general and sweeping assertions’ that do not factor the new debt management policy and the potential for growth in gross domestic product (GDP).

According to the Ministry, all nations borrow for development and putting the total cost of infrastructure projects on our budget had often been detrimental.

Ghana’s achievement of a middle-income status is also limiting access to grants and concessional financing.

The statement said that since Ghana would have to borrow, government’s current policy on borrowing is to borrow smartly to sustain growth, without unduly worsening debt and to that effect strategies were approved by cabinet and parliament in the 2013, 2014 and 2015 budgets.

The objective of those strategies was to ensure that state-owned enterprises that render services and benefit from commercial loans would sign agreements with the Ministry and establish Debt Service Accounts to repay the loans from the revenue that they generate from their customers.

The Ministry said that there was a projection for GDP to grow from 2015 to 2017/2018 since it grew significantly between 2010 and 2012 and cocoa, crude and gas production as well as import substitution in rice, poultry and pharmaceuticals remain promising.

‘We therefore disagree with the IEA’s dire projection of a debt/GDP ratio that does not take account of potential rapid GDP growth and the new debt management policy.’ The statement said.

The Ministry noted the absence of the Atuabo Gas Processing Plant in the IEA’s analysis and said that the plant saves Ghana GH¢500.00 million annually in crude imports for the purpose of powering thermal plants.

The Ministry of Finance also noted that the IEA had also ignored certain interventions such as the establishment of the Stabilization Fund under the Petroleum Revenue Management Act, the slash in crude imports and the National Petroleum Authority’s use of a price stabilization margin in the petroleum price build up. GNA EN-GB X-NONE X-NONE

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