Ghana’s Stabilization Fund appears to be providing the impetus for government to continuously borrow from international and domestic sources in recent times.
Finance Minister Seth Terkper said the focus on the Stabilization Fund was part of the diversified strategy by government to address its economic management glitches.
“If I have a very high fiscal deficit, and the risk that gas supplies and power supplies are going to lead to a likely shortfall in my revenues and therefore I will not meet my fiscal targets, the focus shifts to the Stabilization Fund because the Stabilization Fund is the one that supports the budget,” Mr Terkper told journalists in Accra at a press conference.
He continued: “If I have a policy to cap the Stabilization Fund, and I am reducing that deficit and the risk associated with high deficits are going down but my debt remains the one thing which investors and other things are concerned about as we ourselves as Ghanaians say, we don’t want to go back to HIPC, what do you do? Your policies should be dynamic. So you use the cap policy direction to manage debt. It’s not a matter of not paying to stabilization. No, you are looking at your indices. That is why we have that diversified strategy and the law allows that kind of flexibility.”
He said “government took $250 million off and it was at that point that it decided to cap the Stabilization Fund and use it for debt management.
“And today, we were able to take off $33 million of the bond. And in fact it’s a major factor in our decision because we have over $100 million currently in the Sinking Fund. Last year, when we did the bond with the World Bank, we still had $233 million in that account because it is also meant for refinancing. Once again, we were putting emphasis on using the World Bank money to refinance our domestic debt.”
He furthermore stated: “What we are doing is the same with the $250 million: we did not get in the bridge financing, we are now taking the $100 million, plus $150 million on the $230 million, and if you add the two you have the exact $250 million which gives you the wherewithal to say that I can take half of the 2017 bond from my own resources and from my own strategies.
And this is why the emphasis should shift towards the Sinking Fund and if with TEN Field, again God willing, things go well, we will increase the Stabilization Fund, and by definition the Sinking Fund to $300 million and $350, you are closer to your $500 million.”
By Samuel Boadi