Government presents 2021-2024 medium-term debt strategy to keep borrowing costs low

The Ministry of Finance has set the government’s Medium Term Debt Strategy (MTDS) from this year to 2024 with the intention of keeping borrowing costs as low as possible, reducing debt risk and to pursue actions considered to have a positive impact on public debt.

This thus cancels the MTDS for the period 2020-2023.

The strategy takes into account the costs and risks inherent in the current debt portfolio. This includes future medium-term borrowing needs, the 2021 macroeconomic framework, existing market conditions, and other factors needed to develop the strategy.

This complies with the legal requirements of Article 59 of Law 921.

“As part of the measures aimed at reducing risks, the government will continue to manage the liabilities of the debt portfolio on the basis of non-distressed debt transactions. This could indirectly affect the cash flow from government budgetary operations when the timing of liability management coincides with a negative carry-over on unused cash, ”said a finance ministry statement.

2020 performance medium-term debt management strategy

The Ministry of Finance said Ghana’s macroeconomic framework for 2020 is on a favorable course with macroeconomic stability restored and fiscal consolidation taking root and consistent with monetary policy that has supported strong external sector development.

In addition, the government’s financing conditions, he said, were favorable, which supported growth (even with the COVID-19 pandemic) and inflation in the targeted corridor.

Investor sentiment was also high, and interest rose again in the Ghana Eurobond issue in February 2020, to the tune of US $ 3.0 billion.

The COVID -19 pandemic hit Ghana around March 2020, hurting the positive economic performance of the economy. Therefore, the initial medium-term debt management strategy had to be recalibrated to ensure that the government’s financing gap is closed.

This included the IMF’s rapid credit facility of GH ¢ 5.6 billion (1.45% of GDP); African Development Bank Funding GH ¢ 389.7 million (0.1% of GDP), European Union GH ¢ 504 million (0.13% of GDP); the GH ¢ 10 billion (2.61% of GDP) Bank of Ghana asset purchase program; and World Bank financing of GH ¢ 1.1 billion (4.6% of GDP).

Medium-term macroeconomic framework 2021

The outlook for 2021 and the medium term indicates a strong recovery from the effect of the COVID-19 pandemic.

According to the Ministry of Finance, the increase in the public deficit in 2020 should be temporary and, therefore, the medium term would consolidate up to the budgetary responsibility threshold of less than 5% of GDP by the end of 2024.

He said the focus of the 2021 budget is anchored on debt sustainability.

To achieve this, real GDP growth should average 5.0% over the medium term.

Excluding oil, GDP growth is expected to average 4.9%.

Inflation is expected to fall and be within the Central Bank’s target range of 8 ± 2%.

The overall fiscal balance and primary balance are expected to return to the Fiscal Responsibility Law (FRA) threshold of 5% of GDP and to a positive primary balance by 2024.

The Ministry of Finance said that the MTDS for the period 2021-2024 represents a strong framework for prudent debt management, as it provides a systematic approach to decision-making on the appropriate mix of external and domestic borrowing to finance the debt. 2021 budget.

Therefore, the cost-risk trade-off of alternative borrowing strategies under the MTDS has been assessed in the medium-term context.

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