The Ministry of Finance has warned government needs the controversial $750 million loan facility or else the state will go bankrupt.
The country, it said, is at risk of defaulting on its obligations and defended the government’s decision to go for the loan facility.
Mr. Ken Ofori-Atta explained to the Finance Committee in Parliament that Ghana has over the past recent years accessed financing from the International Capital market and the domestic bond market to support the implementation of its budget.
The international capital market is, however, not available to Ghana this year as a result of the downgrade of the country’s credit rating by international rating agencies.
Meanwhile, the government’s intention to raise funds from the domestic bond markets has not also yielded the desired result.
This was contained in the Committee’s report presented to the House on Wednesday, July 20, 2022.
The report indicated the situation has left the economy in a precarious condition “with rising inflation, rising interest rates, exchange rate depreciation and increasing energy cost.
“These challenges are further exacerbated by the rapidly dwindling reserves of the Bank of Ghana which has declined from US$9bn to about US$3bn.”
“With a monthly demand of over US$600 million, the reserves of the central bank may be exhausted in a few months if urgent steps are not taken to shore up the country’s reserves,” the report said.
The Ministry further indicated there is an urgent need for the Government to secure the US$750 million facility to help shore up the reserve position of the Bank of Ghana to avoid the country defaulting on its international commitments and also to avoid the country moving into insolvency.
The Ministry also touched on the impact of the facility on the country’s debt sustainability levels, which could deprive the country of benefiting from an IMF program.
The IMF, as a policy, does not lend to countries with unsustainable debt levels, and the Ministry explained an MF program will help improve the country’s revenue generation and help restructure its debt to avoid default.
The debt distress position of Ghana, the Minister told the Committee, is consistent with the challenges confronting many African countries where the average debt to GDP levels has risen from an average of 60% to 70% across the continent.
He expressed confidence, however, that a program with the IMF will help restructure the country’s debt and improve revenue generation to bring the nation’s debt to sustainable levels.