The Minister of Finance, Mr Seth Terkper, who made the suggestion in Accra yesterday at a meeting with chief executives and board chairmen of SOEs said, the government would no longer provide guarantees to state-owned enterprises to enable them to go for credit, but would work with them in collaboration with the Bank of Ghana to strengthen their books to enable them to borrow on the strength of the financials.

For a start, he stated, SOEs in the energy sector such as the Ghana National Petroleum Corporation, the Ghana Grid Company Ltd (GRIDCo) and the Volta River Authority (VRA) could take a cue from the likes of Ghana Cocoa Board (COCOBOD) and subject themselves to corporate ratings in order to raise debt at cheaper rates on the local or international markets.

“The SOEs, should all aim for ratings; corporate ratings. This can reduce the cost of borrowing. The energy sector especially, can take the lead so that they can issue energy bonds,” Mr Terkper stated at a meeting during which the Finance Ministry engaged the bosses of the SOEs on the economic turnaround story and how the SOEs could take advantage of it.

The meeting also briefed the SOEs on the Public Financial Management Act, 2016 (Act 921) and implications on their actions, inactions, their obligations and new rules of accounting and financial reporting.

Off government guarantee

As part of the debt management, the government is working towards weaning off SOEs from government balance sheet and allow them to stand on their own balance sheets.

According to Mr Terkper, the governments would use vehicles such as the Escrow Account and the Infrastructure Fund as a Guarantee Fund to back their credit transactions, rather than providing a direct government guarantee.

While admitting that, subsidies affect some of the SOEs negatively, others including the utilities did not also make good their loan obligations they contract with government guarantees, thus adding to the public debt stock which stood at GH¢109.8 billion or 65.9 per cent of Gross Domestic Product (GDP) in July 2016.

Initial costs

The downside of the government policy to take the SOEs off its guarantee could have an initial implication of increasing the cost at which they borrow or finance projects.

Mr Terkper stressed, “that is where we should go”, adding that government guarantee would now be secondary. “We should set goals and look for strategies to make the SOEs sector more effective and efficient.”

Monetary policy

A deputy governor of the Bank of Ghana, Mr Millison Narh, said,the central bank would continue to pursue monetary policies in support of fiscal policies to restore macroeconomic stability, which had started showing positive outcomes.

“There is the need for closer collaboration between the fiscal and monetary policy measures. For SOEs to become viable, the microeconomic environment must be strong, regulation and the legal framework must be well couched. Already, we have started seeing a gradual return to economic stability,” Mr Narh stated.