Budget 2016 deficit shows increased financing - Domestic and external are main sources
The financing of the budget deficit for 2016 showed increased financing requirements from both domestic and external sources, the Minister of Finance, Mr Ken Ofori-Attah, has said.
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Presenting the Budget Statement and Economic Policy of the Government for the 2017 financial year before Parliament in Accra yesterday, he said for instance that, “domestic financing comprised solely of marketable instruments in the wake of the first year of implementation of the zero central bank financing while the foreign financing included project loan disbursements on on-going projects, and a sovereign bond issue to partially refinance the maturing bond in 2017 and for budget support”.
Subsequently, the soft-spoken Finance Minister said for the larger than expected fiscal deficit and financing requirements in 2016, total public debt stock as a ratio of Gross Domestic Project (GDP), increased from 72.2 per cent at end-2015 to about 73 per cent of GDP at end-2016.
On the other hand, Mr Ofori-Attah said domestic and external debt stood at 31.7 per cent of GDP and 40.8 per cent, respectively.
“In nominal terms, the public debt stock at end-December 2016 stood at GH¢ 122,263.00 million (US$29,227.15 million), comprising external and domestic debt of GH¢ 68,859.62 million (US$16,460.99 million) and GH¢ 53,403.39 million (US$12,766.16 million), respectively” he said.
Medium Term Debt Mgt
Mr Ofori Attah said the government’s Medium Term Debt Management Strategy (MTDS) for the period 2016-2018was developed to guide annual borrowing for 2016 and incorporate the risk elements identified in the debt portfolio, while focusing on developing the domestic debt market.
“The strategy involved channeling concessional loans and grants to finance social infrastructure, utilise non-concessional borrowing for self-financing capital projects, and institute escrow mechanisms for on-lent facilities” he said.
2016 Eurobond Issue
“Mr Speaker, in the 2016 Budget Statement, approval was given to issue up to US$1.0 billion sovereign bond on the International Capital Market (ICM). This was Ghana’s fifth Eurobond floatation on the ICM,” he said.
According to him, the bond had a face value of US$750 million and was accepted at a yield of 9.25 per cent.
The bond, the Finance Minister said was a back-end amortising maturity with a weighted average tenor of five years.
He noted that the principal is to be paid in three instalments of US$250 million in September 2020, September 2021 and September 2022.
Capital Market Developments
“Mr. Speaker, as stated in the 2016 Budget statement, the government adopted the Book Building process as a means to raise funds from the domestic capital.
Mr Ofori Attah said as part of the process, the government issued a 3-year, 5-year and 10-year bonds through the book building approach.
“In October 2016, the government issued its maiden domestic US-dollar denominated bond. The bond had a 2-year tenor and yielded US$94.64 million at a coupon rate of six per cent. The offer was open to resident investors only. The 2-year bond had one of the lowest yields apart from the 2007 bond which is currently trading at about 4.1 per cent and maturing in less than a year”, he said.
In November 2016, the government, he said issued its first 10-year domestic bond which yielded an amount of GH¢ 438 million at a cost of 19 per cent and matures in 2026.