Ministry of Finance - Republic of Ghana October 2016

Transcription

1 Linkages betw een debt sustainability and debt management strategies. Fiscal and Debt Policies in Ghana Sovereign Debt Management Forum 2016 The World Bank 19 th -20 th October Samuel Danquah Arkhurst (Director Debt Mgt Division) Ministry of Finance - Republic of Ghana October 2016

2 Country Context - Ghana

3 Recent History of the Republic of Ghana Territory & Capital Population (2013) Nominal GDP (2015) 238,537 sq. Km; Accra 27 million GDP Growth (2015) 3.9% US$ 37.0 bn GDP Per Capita US$ 1,339 Sovereign Credit Ratings Moody s: B3 / Fitch: B / S&P: B- CPIA At 3.6 up from 3.4 Democracy Vibrant democracy with an impending to be heavily contested December Election 3

4 Evolution of Fiscal Policy and Debt Management to Date 4th Republic begins in 1992 with significant fiscal requirement Fiscal Deficit increases as a result of unbudgeted outlays (ie for Peacekeeping operations in West Africa and District Level elections) Program and project aid from external sources shrank remarkably Ghana subscribes to (HIPC) Beginning of PRSPs as initiatives for the utilization of HIPC Increasing Social Intervention Programmes to meet the MDGs by 2015 Fiscal Space from HIPC, MDRI, and Domestic Revenue and Dev t Partners. Ghana Implements Single Spine Salary Structure (SSSS) review GDP rebasing and transition to country (LMIC) status SSSS related arrears, rising subsidy expenditure, higher interest payments, a shortfall in taxes and grants puts pressure on the budget; resulting in large deficit overshoots Economic management further compounded by the onset of external pressures Crude oil export commences with exports falling short of expectations in 2012 Trades Union unrest and increases in Wages Set back with twin deficits (Budget & BoG0 Ghana produces a Home Grown Policy to deal with twin deficit For credibility, Ghana signs 3-Year US$ 918mn ECF Programme w ith IMF w ith tw o (3) positive review s so far Twin deficits brought under control in 2015 Oil price crash in addition to traditional exports (Cocoa and Gold) Sharp increase in domestic debt (from 3% of GDP in 1990 to 25% of GDP in 2000) to cater for fiscal excesses Public Debt almost hitting 181% of GDP by 2000 Establishment of the External Debt Secretariat (EDS) Debt levels starts to accumulate to HIPC completion point in 2006 with accommodate the increasing fiscal debt to GDP ratio reaching 25% deficits The First post-hipc country to access International Capital Markets with a benchmark issue of US$750m in 2007, 10yr tenure loan, at a coupon rate of 8.5% ADMU elevated to become the Aid & Debt Management Division (ADMD) in 2004 DMD becomes a stand-alone Division w ith the aid component ceded to External Mobilisations Division 2013,2014,2015,2016 Eurobond Establishment of Sinking Fund Development of Domestic Market New Debt Ceilings from IMF programme LMIC status and cost of financing Gross financing needs peaked at 23.6% of GDP in 2015 New PFM law Repeals the 1970 Loans Act New PFM law establishes a Public Debt Management Office 4

5 Historical Link betw een Fiscal Deficit and Debt 5

6 DSA and MTDS

7 Ghana Indicators of Public Debt Under Alternative Scenarios Indicators Breaching Thresholds under the Baseline PV of Debt-to GDP ratio Debt Service to Revenue Ratio 7

8 MTDS Results Cost/Risk Indicators External debt Domestic debt Total debt Cost of debt Refinancing risk Interest payment as % GDP Weighted Av. IR (%) ATM (years) Debt maturing in 1yr (% of total) Debt maturing in 1yr (% of GDP) Exchange Rate Risk Interest Rate Risk Financing Risks ATR (years) Interest rate risk Debt refixing in 1yr (% of total) Fixed rate debt (% of total) FX risk FX debt (% of total debt) 58.0 ST FX debt (% of reserves) 15.2

9 Managing the Intra and inter linkages

10 Current Reform Agenda Conduct of Fiscal Policy and Debt Policies an integral part of current policy drive Governance Issues DMD leads MTDS and DSA PFM law establishes Public Debt Management Office and codifies these links. MTFF / MTDS MTFF and MTDS MTDS no more a residual policy from MTDS now to be presented and approved by Cabinet Recognition as an integral part of the budget process Cash Management now targeting financing as exogenous, thus cash outfows to adjust to shocks Governance Operations Policy Fiscal Policy Under the Home Grown Policy and IMF ECF programme, fiscal consolidation for the medium term. PFM law prescribes numerical rules for fiscal stance Bank of Ghana amendment reduces Central Bank Financing to 5% of previous yeaer s revenue with other safety guards Debt Management Policies Strict handle on contingent Liabilities Refinancing / Buyback Escrow / On-Lending Interest rate hedge Sinking fund to buffer roll-over /maturity risks Development of Risk Management framework 10

11 Ghana s Eurobond Story A tale for two Cities MTDS and DSA Year Face Value Coupon Tenor in Use of Proceeds in Mn USD Rate Years CAPEX Liquidity Mgt % , % with 3 Yr , Soft 8.13% Amortizatio n 1, with 3 Yr , Soft 10.75% Amortizatio 1, n with 3 Yr Soft 9.25% Amortizatio n TOTAL 4, , , DOMESTIC US Dollar Bond 2016 Oct % 2 year New Debt Policies for bullet loans shits into buy-back mechanism. Sinking Fund accumulated funds from Oil Revenue. Utilised US$130 mn in Aug 2016 for buyback of 2017 Bond Maturity. Total Buyback of US$549 mn out of US$750 mn already done. About US$800 mn already used to retire domestic S.T. Bills in 2015 & 2016 Excess of US$500mn available to take off US$200 mn balance of 2017 maturity and further buyback of remaining bonds 1 st Domestic Dollar Bond hugely successful last week at about US$94 mn for 6% for a 2 year period to also add to a further liquidity mgt. 11

12 Results of all this. Historical Issues Rising Public Debt to GDP since Rapid increase in Measures Implemented Refinance short-dated, high cost GHS debt with long term, IDA guaranteed USD debt Sinking fund established to manage repayments Commercial funding only for commercially viable and priority high-impact projects Comprehensive debt sustainability plan being developed with IMF Overall Achievements Public Debt to GDP ratio responding to debt management policies. Tapering downwards for the first time since

13 Thank you