Former Finance Minister, Seth Terkper, is charging government to take debt repayment very seriously since any delay would further increase interest costs on loans and escalate the country’s debt burden.

The country’s international bonds in recent times have witnessed increasing interest rates because of the perceived risks by investors about the economy.

Speaking during a media dialogue on Ghana’s finances ahead of the 2022 Budget next week, Mr. Terkper said interest payment and compensation is crowding out capital expenditure, a situation many have attributed to liquidity or cash constraints within the economy.

“Those of you who may have seen the graphs, for Ghana’s yield on our bonds are going up…those yields are going up. At a point they were going down, but now going up again.  This for us is enough justification that we should take debt repayment seriously as we had with the Sinking Fund because it is that which influences your yields.”

“I think this is the lesson we have to learn. We have rollover risk - you have to be rolling over- you have to be repaying the loans…looking for money, borrow money to repay the loans. So we have gone through some of these things already”, he pointed out.

He is of the belief that the country in its present state will continue to borrow to finance the fiscal deficit, which to his estimation is not the best.

“They [government] estimated that debt in July 2021, captured in the MPC report, to be 76.4%.  I just want you to note that even if you do a minimum financing for the rest of the year, your debt should be 80%”, he stressed.

The former Finance Minister also expressed worry about the fiscal deficit, saying, the current numbers show the deficit has remained same, which he described does not augur well for the country.

“If you look at the revenue numbers, it is not growing as expected despite the recovery in the economy. But expenditure has slightly gone up. Even the International Monetary Fund keeps the deficit at a higher rate at about 13%”, Mr. Tekper argued.

Economy looks promising but……

He however expressed optimism for the economy going forward, but only if the fiscal challenges are addressed.

“On the positive note, we noted the Special Drawing Rights, we noted crude oil prices [generating more revenue], we noted post-Covid-19 recovery; all will be positive towards the budget”, adding “on the downside, we know the pressure on interest and compensation which is crowding out capital, recurrent expenses, allocation of resources to the statutory fund and the rest from the capping, which hasn’t gone away yet”, he added.