Seth Terkper cautions gov’t to spend prudently

Government has been cautioned to ensure good management of the economy, especially with its expenditure.

Financial experts wants the government to put in fiscal measures that will create buffers for its high expenditures programmes.

The former Finance Minister Seth Terkper relent that, fiscal sustainability currently hinges on discovering more oil field to create revenue to support government flagship programmes such as the Free SHS, and one constituency, one million dollars programme, among others.

He admonished the government to learn from the shocks that hit the country after Single Spine was implemented.

“Frankly, Ghana had buffers in HIPC, debt to GDP fell from about 162 percent to 28 percent but we blew it. Hopefully with that experience, we will say never again. A lot depends on policies. I worry about fiscal sustainability most. We did Single Spine and it hit the economy very hard, and that was just 600,000 of civil servants. The top who earned most were just the military brass, top civil servants and the rest, and yet we know what it did to the wage bill, so when you talk about free SHS and all those things, the bill is going to be big”.

The former finance Minister, was of the view that measures must be put in place to support other productive sectors of the economy from being starve off resources.

“I’m not saying education is not productive, education is productive but it is at the long distinction end. We have to make a fiscal decision whether we divert additional resources to cater for that or productive resources. It is a fiscal management issue,” he stressed.

Mr. Terkper however pointed out that there is hope if government is able to discover more oil fields and use the proceeds for the projects.

“Some estimates are that we could do 300,000 to 350,000 barrels on the Hess discovery. If we do that we could have a buffer,” he said adding that a lot needs to be done to sustain the programmes being embarked upon by government.

Mr Terkper added that, the maritime boundary ruling in favour of Ghana would boost investor confidence and provide certainty in the country’s economic direction.

Speaking to a section of journalists on the ruling, Mr Terkper said the economic case for International Tribunal for the Law of the Sea (ITLOS) laid in increased oil and gas production, forging ahead with the elaborate gas-to-power programme, and stopping the hesitation by private sector investors.

“The obvious outcomes are increases in exports and domestic revenues, the stability of the currency as well as restoration of power supply to the economy—and possible export of the product through the West Africa Power Pool (WAPP),” he said.

On Saturday, September 23, a Special Chamber of the International Tribunal for the Law of the Sea (ITLOS) gave its ruling on the maritime boundary dispute between Ghana and Cote d’Ivoire in favour of the former.

The two states issued a joint-memorandum immediately to accept the decision.

Similarly, commendations have gone to the past and new administrations for the bipartisan approach as well as to Ghana’s technical team, comprising public servants and private sector advisers, for their hard work.

Mr Terkper said besides these direct and obvious benefits from the increase in crude oil production and power production, the ITLOS decision would boost decision-making by the private and public sectors for vibrant oil services projects such as ship repairs and maintenance; finance; catering, among others and help boost mid- and downstream petrochemical industries, including bitumen, fertilizer, and industrial chemicals.

He said the case for value addition and diversification of the economy through the energy sector was strong in order to avoid the fate of other primary products such as cocoa and minerals.

Mr Terkper said the certainty in the energy sector from the ITLOS decision in boosting production, exports and revenues also improve the success of Ghana’s new debt management and capital expenditure policies—substantially rooted in allocating substantial oil revenues to manage the country’s debt instead of channeling it into consumption through the recurrent Budget.

First, the flows into the Sinking Fund and subsequent use to “buy-back” our sovereign bonds are based on capping the Stabilization Fund and channeling the annual excess flows into debt management, as required by the Petroleum Revenue Management Act (PRMA).

By the end of 2016, Ghana had used slightly over US$330 million of its own oil revenues to redeem various debt, notably part of the 2007 Sovereign Bond that was due for redemption next month (October 2017).

It has averted coughing up US$750 million to redeem or refinance the Bond—at a high-interest rate or outright default (given a sluggish economy and high debt levels).

He said the combined Sinking Fund and “Buy-Back” programme means that Ghana is gradually lowering the “roll-over” risk associated with its long-standing “interest-only” loan payment policy for bills and bonds.

The nation is on course to replace them with gradual redemption of the principal element of these so-called “bullet” loans.

With ITLOS, an important question from, or declaration to, investors that will not arise again when Ghana goes on “road show” to issue a major bond.

The additional oil flows that will arise from the ITLOS decision is welcome in continuing with these policies under the PRMA the Ghana Infrastructure Investment Fund (GIIF) as a Sovereign Wealth Fund (SWF), which purpose is to move away from issuing unfettered sovereign guarantees for virtually all substantial borrowing for commercial projects.

“While Ghana savours the ITLOS decision and is undoubtedly proud of its legal team and foresight to go to the courts amicable settlement, we note that the decision need not result in outright benefits to us alone. Ghana and Cote d’Ivoire already share power under the West Africa Power Pool,” he said.

Source: Adnan Adams Mohammed

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