Vice President Dr Mahamudu Bawumia says government is reprofiling the country’s debt as a matter of strategy to enable to replace more expensive debt with less expensive debt.
He said the country would also replace its short-term debt with long-term debt adding the recent bond issued some two weeks ago was part of the reprofiling strategy.
Government raised $2.25 million of investment for a 15-year cedi bond.
Speaking at Joy FM’s 100 days with Dr Bawumia Town Hall event at the Law Court Complex in Accra Monday, he noted that “What is so remarkable about what I call the deal of the year so far is that we have been able to get foreign exchange without increasing our debt stock.
“Many people didn’t understand the transaction and thought that we have gone to borrow $2 billion to add to Ghana’s debt. No! we are actually replacing more expensive debt with less expensive debt and elongating it and making it better for this country.
Government has raised more than GH3.4 billion in the country‘s first 15-year bond as well as GH1.4 billion in another seven-year government paper that was also closed last Friday.
The State is expected to pay investors who participated in the two bonds an interest of 19.75 percent.
Although government actually had GH3.427 billion worth of bids from investors, it but took GH3.422 billion with proceeds from the seven and 15-year bonds totalling almost GH5 billion.
The monies are expected to hit government account Monday, April 3.
Some of the foreign investors who participated in the bond auction are expected to bring in their dollars which expected has gone a long way to help stabilise the cedi against the U.S dollar.
Dr Bawumia disclosed that in the process of doing that, Ghana has witnessed a massive increase in its foreign exchange reserves.
From independence until the end of 2016, Ghana’s foreign reserves have been $6 billion, however “in less than 100 days we have increased it to $8 billion.”
The former Deputy Governor of the Central Bank explained that government has created a lot of fiscal debt by capping earmarked funds to 25 percent of government revenue and realigning expenditures to government priorities.
This, he said, is a remarkable reform as budgets from 2011-2015 attempted to do that but never did it.
“We did in our first budget and it created some space for us because we were heading into a ditch. You take wages; interest payments, statutory payment and they exceeded all your revenue.
Dr Bawumia said this made it difficult to manage the economy and the capping made that possible.
Being a highly indebted country, there was the need to reprofile Ghana’s public debt, which stands at GH120 billion in 2016, he noted.