Question

Describe the restrictions and guidelines on external borrowing and guarantee in Ghana

Answer 1

Restrictions and guidelines on external borrowing and guarantee in Ghana

The restrictions of on external borrowing and guarantee:

External borrowing:

1. Maximum domestic borrowing per annum: The maximum domestic borrowing limits per annum will be guided by the NDF target set by the government of the republic of Ghana in agreement with its development partners. This is restricted to borrowing under Government securities and not domestic term loans.

2. Minimum single external borrowing amount: For the purpose of management and administrative cumbersomeness, the minimum single borrowing from external sources is set at 15USD / is equivalent in other foreign countries.

3. Maximum external borrowing per annum: It will be guided by the borrowing amounts recommended under the latest debt sustainability analysis report. This will also be informed by the current annual borrowing plan and medium terms debt strategy. Further any sectorial or institutional borrowing or guarantee ceiling in the DSA and MTDS will be applied.

4. Maximum guarantee and onlending per annum: The maximum guarantee or onlending that could be extended to any SEo on annual basis will be guided by the performance of the SOE. The maximum annual limit for an SOE will not exceed the sum of three year backward looking revenue generated. For a company which has no three year backward looking reference, the forecasted cash flow will be used when the company is producing at full capacity. This provision will also be subjected to the conditions for issuing guarantee for the SOE or the private company.

Guarantee:

1. Guarantee for SOE: a) Must satisfy the necessary conditions of the preparatory to approval stages of the public borrowing guidelines. b) The PFA shall conduct project viability analysis and inform ADMD of its findings for the appropriate actions on the project.

2. Guarantee for private sector: a) Must satisfy the necessary conditions of the preparatory to approval stages of the public borrowing guidelines. b) The PFA shall conduct project viability analysis and inform ADMD of its findings for the appropriate actions on the project. c) Guarateeing for the private sector must be economically viable and of strategic importance to the nation, which must be determined by cabinet in collaboration with the public investment division.