Debt crisis threatens if Eurobond does not invest wisely – IMF report

Company News from Thursday, April 11, 2019

Source: thebftonline.com

2019-04-11

The latest report of the financial review published by the International Monetary Fund (IMF) has warned the government that it could sink into a debt crisis if non-concessional loans such as Eurobonds are not invested in bonds. profitable projects that improve repayment capacity.

The report was launched yesterday in Washington, DC, and said that Ghana – along with a number of countries in sub-Saharan Africa who chose the Eurobond market to fund their deficit – faces a risk of debt vulnerability.

"The continued use of nonconcessional financing in many countries (Ivory Coast, Ethiopia, Ghana, Kenya, Senegal) could increase the vulnerability of their debt if revenues are not properly managed to generate growth and repayment capabilities, "according to the latest Report of the Financial Review warned.

After making its debut on the Eurobond market in 2007, Ghana has since entered the market seven times – the latest being a $ 3 billion bond sold in three parts with average maturities of seven. , 12 and 31 years old.

Finance Minister Ken Ofori-Atta said the $ 2 billion of the last bond will be used to finance some infrastructure projects. The use of the remaining funds to repay the maturing debts adds to the huge amount of Eurobonds previously spent to refinance debts.

According to the 2019 budget, in which the government announced for the first time its intention to raise $ 3 billion in international capital markets, about $ 2 billion will be used to implement this year's budget, while remaining will be used to refinance 2023, 2026 and more. 2030 Eurobonds.

The latest edition of the Financial Review already indicated that the banking sector's sanitation was affecting the country's total stock of debt – increasing it by 3.5% of GDP, so that Investment in borrowed funds had to be placed in areas that: can stimulate growth and generate enough income.

Reforms

The report also indicates that ongoing fiscal management reforms could provide countries such as Ghana with the means to increase their resource base through increased efficiency gains, with wastage being minimized.

Over the past two years, the shortfall has resulted in reduced spending among other measures; and the IMF's financial review predicts that other improved PFM measures will ensure that the few resources that enter will be used effectively.

"The reduction in off-budget activities (for example in China and Ghana) could improve the monitoring of debt levels and fiscal risks, lead to more prudent debt management strategies and promote transparency," the statement said. Fiscal Monitor.

The financial review badyzes and badyzes the latest developments in public finance. It updates the budgetary implications of the crisis and medium-term fiscal projections, and badesses policies to improve public finances.

At the news conference after the report was released, Victor Gaspar, director of the IMF's Fiscal Affairs Department, said that, in the face of slowing global growth and growing uncertainty, fiscal policy should make it possible to facing potential downturns – balancing growth and sustainability goals – while putting greater emphasis on reforms to adapt to a rapidly changing global economy.

"To foster stronger and more inclusive growth, fiscal policy must adapt to the major trends that are reshaping the global economy. Demographic changes, rapid technological progress and increasing global economic integration pose structural challenges, "he added.