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Ghana’s debt-servicing-to-revenue-ratio is 60% – Alex Mould challenges IMF

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Former Executive Director of Standard Chartered Bank, Alex Mould, has challenged the Resident Representative of International Monetary Fund (IMF) claim that, Ghana’s debt servicing ratio to revenue for 2019 was around 30 percent.

According to the financial expert, the figure quoted by the IMF rep was not accurate. “It should rather be approximately 60%”, the former Banker noted.

He calculated that, based on MoFEP data on Ghana’s 2019 Fiscals released in February 2020, Ghana’s interest payment was around GHC20 billion with debt amortisation (foreign debt alone) being about GHC11 billion.

“So adding interest and principal amortization (however, only for foreign debt) total debt service for 2019 was around GHC31 billion. And, according to the Ghana Revenue Authority, domestic revenue collected for 2019 was GHC52 billion”, Mr Mould who is also the immediate past Chief Executive of Ghana National Petroleum Corporation clarified.

“So in the ratio form; debt servicing to domestic revenue is 31:52 (in GHC). This, in percentage wise, total debt servicing to domestic revenue will be approximately 60%.

“Even if he was referring to only interest payment in the debt service number , which ordinarily include debt principle amortization, the interest-only-debt-service to domestic revenue is approximately 40% for 2019” he stressed.

Meanwhile, the IMF rep, Dr. Albert Touna-Mama, speaking at the recent Graphic Business/Stanbic Bank Breakfast meeting, described the 30% debt servicing to revenue as twice as much compared to countries of similar features.

He further revealed that, government total debt position as at DEC 31, 2019 was GH¢215 billion, describing it as worrying the borrowing rate of Ghana.

“When we think about debt and borrowing, I want to talk about the fact that we don’t only measure it with respect to GDP. An important metric that we look at and in the case of Ghana is a metric that is of concern, that is, debt service to revenue.”

“We use debt service to revenue as a proxy of how sustainable the debt of Ghana is. At the moment, that ratio is close 30 percent. When we take that for countries of similar features, it should be below 18 percent. This is twice as much as what it should be. So, of course, we are concerned about the borrowing of Ghana,” he explained.

The World Bank has cautioned Ghana against heaping its external debt stating that the country is currently rated as a moderate to high-risk debt distressed country.

It further warned that, Ghana must tread cautiously in order not to cross acceptable thresholds of debt sustainability.

Consequently, the Finance Minister, Ken Ofori-Atta, announced in the 2019 budget that government is projecting to achieve GH¢67.1 billion in total revenue, representing 16.9 percent of GDP, in the 2020 fiscal year.

He noted that the country is expected to use GH¢21.7 billion which translates to about 5.4 percent of GDP to service interest on its debt.

Of this amount, he further said domestic interest payments will constitute about 76.3 percent and amount to GH¢16.6 billion.

Source: peacefmonline.com

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Bawumia commissions 1,000 tonne warehouse at Asaam

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Vice President, Dr. Mahamudu Bawumia has affirmed the NPP government’s commitment to the introduction of measures to improve the agriculture sector and guarantee food security while making life better for farmers.

In line with this, government will continue to provide the necessary agricultural inputs such as fertilisers and Extension Services while working to reduce post-harvest losses.

Dr. Mahamudu Bawumia gave the assurance when he commissioned a 1,000-tonne warehouse at Asaam near Mampong in the Ashanti Region on Monday, October 12, 2020.

The Asaam warehouse is one of 80 warehouses being constructed across the country under the One District One Warehouse programme to complement the Planting for Food and Jobs programme.

Designed to store the abundant food produced during its season and reduce post-harvest losses, the warehouses are also designed to support agro-processing factories established under the One District One Factory initiative.

Speaking at the commissioning, the Vice President emphasised government’s focus on the agriculture sector.

Our record of innovation since we assumed office in 2017 is there for all to see. We have introduced flagship programmes such as Planting for Food and Jobs.

“We have ensured the regular supply of inputs like fertilizers and seeds to farmers. Cocoa farmers are enjoying enhanced prices for their labour.”

He further added that; “This warehouse, and others like this across the country, will ensure that your hard work and sweat do not go to waste. Excess food will be stored here for use in the lean season.”

“We will continue to implement programmes that will make agriculture attractive to the youth, and diversify the agriculture value chain,” he pledged

 

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MTN Group partners Telecom Infra Project

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MTN Group and Telecom Infra Project (TIP) have joined forces to support the evolution of MTN’s communication transport infrastructure, which will become a platform for future revenue growth and profitability.

MTN Group Chief Technology and Information Officer, Charles Molapisi said “Our partnership with TIP will drive the specific requirements of our network to meet our subscriber demands, setting us apart on our network scalability and adaptability”.

TIP’s Chief Engineer, David Hutton communication transport capacity will be deployed through the partnership to support traffic growth over the next three years.

Also, it will provide support for new services as part of the evolution of 5G and new enterprise services.

It will also reduce the time to market through more focused agile service provisioning.

“Through the use of open protocols and interfaces, and the ability to incorporate specific innovations focused on the performance of each network component, TIP’s open disaggregated, standard-based transport networks can help MTN move closer to its ideal transport infrastructure,” he said.

The TIP community, which aggregates members across the whole transport network value chain, is a key tool for MTN to build its future transport infrastructure.

To achieve the objective of increasing network efficiency, MTN has identified a set of requirements named CASSI that will support its work by:

• Convergent and congestion-free: Delivering on the capacity requirements from all network access technologies, including the most demanding, like accesses to fiber, next-generation radio systems, enterprise, and consumer requirements.

• Always on: Implementing a fully automated resilient transport network, to support high availability as demanded by advanced digital services.

• Scalable: Allowing for an easy/efficient capacity expansion, able to accommodate fast-growing traffic demands at a lower cost.

• Simplified: Making use of standardised network configurations and open protocols, to drive lower unit costs and increase capital expenditure efficiencies.

• Intelligent: Automation of the network operations by using software to optimise network resource planning and management, achieving higher operational efficiencies by enabling use cases such as smart planning, auto-provisioning, network visualisation, and forecasting and network slicing among others.

MTN will work together with the TIP community in the months ahead to build transport products and network configurations addressing the company’s requirements that could be tested and validated in TIP’s community labs and in the field, to create easy-to-use commercial solutions for the CASSI use cases

 

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Government, Cenpower agree Gas Supply Agreement to Secure Cost Savings of up to $3.0 billion

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The Ministry of Finance has said that Cenpower has agreed to switch to natural gas as primary fuel, committing itself to using Ghana’s abundant natural resources.

A statement ny the Ministry said the conversion to natural gas by Cenpower, which will provide cost savings of approximately $3.0 billion, demonstrates significant momentum in this administration’s implementation of the Energy Sector Recovery Programme (ESRP).

Government of Ghana calls on all Independent Power Producers to emulate Cenpower and CENIT in advancing solutions to ensure the long term sustainability of the energy sector.

Below is the full statement;

This week, Cenpower Generation Company Limited (Cenpower) has committed to switching its primary fuel from light crude oil (LCO) to natural gas and signed a gas supply agreement (GSA) with the Ghana National Petroleum Corporation (GNPC). Gas operations are expected to begin by the end of this week.

Government welcomes this significant milestone and commitment from Cenpower. The GSA is a key part of the proposal put forward by Government during negotiations with Cenpower and will deliver substantial cost savings, estimated at $3.0 billion over the remaining term of the Cenpower PPA.

Furthermore, conversion to natural gas will have important environmental benefits, as emissions will be lowered and Ghana’s abundant natural gas resources effectively utilised for the benefit of the Ghanaian people and business community.

Additionally, the move to natural gas will alleviate the considerable pressure on Government from its take-or-pay commitments with fuel suppliers and allow

for the substitution of imported fuels with locally available natural gas, thus positively impacting the capital account.

Cenpower is a major power producer in Ghana, providing approximately 10% of Ghana’s total electricity generation. This project is an excellent example of the public and private sectors working together in Ghana to attract private investment while ensuring sustainable development.

Presently, Ghana pays over US$500 million a year for unused electricity. Most of the power PPAs are legacy agreements, entered into under the previous administration in an uncoordinated and short-sighted attempt to end dumsor. The tariffs agreed were not competitive and have contributed significantly to the build-up of debt in the sector and oversupply of energy.

This Government, in collaboration with the World Bank, established the Energy Sector Recovery Programme (ESRP), identifying the policies and actions needed for financial recovery in the energy sector over a five-year horizon (2019-2023). As part of these reforms, Government is taking steps to institute competitive bidding for future additional capacity, so as to ensure that future tariffs are fair and in line with expected pricing benchmarks.

Government has demonstrated its commitment to the ESRP by actively developing whole-of-sector initiatives and reforms, including implementation of the Cash Waterfall Mechanism (CWM) in April 2020, which allows tariff revenues of the Electricity Company of Ghana (ECG) to be distributed in a more transparent manner. As well, Government is managing payment of energy sector arrears, despite the challenging fiscal situation, which has been exacerbated by the COVID-19 pandemic.

The Government negotiating team, established under the Energy Sector Recovery Task Force (ESRTF), which is helmed by the Senior Minister, is working bilaterally with independent power producers (IPPs) and gas suppliers (GSs) under the ESRP Consultation Process, to secure more favourable agreements for both parties and achieve a balanced energy sector capable of delivering fair, long-term energy

partnerships and solutions. Government has undertaken these discussions in good faith and urges all IPPs to continue working closely with the Government negotiating team to conclude negotiations as soon as possible. In September, Government successfully secured terms for an amended PPA with CENIT Power Limited.

Source: Laud Business

 

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