IMF cautions the Ghanaian government against collateralised borrowing

The International Monetary Fund (IMF), has warned the Ghanaian government to avoid collateralized borrowing as a way of reducing the increasing public debt.

IMF

After the conclusion of its Article IV Consultation with Ghana, the Executive Board of the Fund said he was concerned about Ghana’s high risk of debt distress. He said there was a need to strengthen the fiscal rules and phase out off-budget operations.

Collateralized borrowing is when an institution pledges its assets or receivables to a lender which can be called upon in case of a default.

For example, government institutions such as GETFund and National Health Insurance Authority (NHIA) that receive funds from the GETFund and NHIL levies, could take a loan and use proceeds from the levies as collateral.

In their statement, the Executive Directors entreated the authorities to halt the new collateralized borrowing to reduce public debt and improve fiscal transparency.

The government’s US$2 billion sinohydro bauxite deal is seen as one of the new collateralized arrangements. In this deal, the government seeks to leverage its bauxite resources for the Chinese facility.

The IMF’s statement is coming at a time when the public debt stock as of September 2019, was at GH¢208.6 billion, equivalent to 60.3% (GDP), according to the most recent data released by the Bank Ghana.

In September last year, BoG reported the debt stock at GH¢170.8 billion, equivalent to 57.2% of GDP.

Debt dynamics

The IMF called on the government to take a more ambitious fiscal stance as it considers a comprehensive domestic revenue mobilization strategy.

Meanwhile, some of the directors suggested the adoption of a formal debt anchor to guide debt sustainability efforts over the medium term.

Eyewitness? Submit your stories now via social or:

Email: news@pulselive.co.ke

Recommended articles

Linet Toto excited as she unveils sleek ride after 1 month in office [Photos]

Linet Toto excited as she unveils sleek ride after 1 month in office [Photos]

Africa’s richest man Aliko Dangote poised to overtake another Russian billionaire Vladimir Lisin on Bloomberg billionaires list

Africa’s richest man Aliko Dangote poised to overtake another Russian billionaire Vladimir Lisin on Bloomberg billionaires list

Diwali 2022: Is Monday a public holiday in Kenya?

Diwali 2022: Is Monday a public holiday in Kenya?

Aliko Dangote the richest man in Africa just got richer

Aliko Dangote the richest man in Africa just got richer

Mzee Kibor's will made public, revealing how vast wealth and millions will be distributed

Mzee Kibor's will made public, revealing how vast wealth and millions will be distributed

Ini Edo posts new photos amid reports of welcoming a baby through surrogacy

Ini Edo posts new photos amid reports of welcoming a baby through surrogacy

Mathias Pogba brands Paul Pogba 'a so-called Muslim steeped in witchcraft' amid fetish claims about Kylian Mbappe

Mathias Pogba brands Paul Pogba 'a so-called Muslim steeped in witchcraft' amid fetish claims about Kylian Mbappe

Referee behind chaos at AFCON was rushed to hospital after match

Referee behind chaos at AFCON was rushed to hospital after match

Ne-Yo speaks out after wife Crystal announced end of their 8-year marriage

Ne-Yo speaks out after wife Crystal announced end of their 8-year marriage