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Institute says Oil Refinery’s debt must be public debt
Accra ( 24 April 2002) - The Institute of Chartered Accountants, Ghana (ICA), has advised government to treat the debt of Tema Oil Refinery as a public debt and should not be tied to petroleum pricing. It explained that it would have adverse effects on pricing in the event of rising crude oil prices.
“We also understand that the pricing of the petroleum debt is currently tied to relatively high interest rates making the servicing of interest on that expensive. We believe that the government can refinance that debt using Government of Ghana Index-Linked bonds, which as a lower fixed real interest rate.”
These were contained in the ICA’s Ghana Budget Digest - 2002, which espouses the Institute’s views and suggestion’s on this year’s budget. The ICA noted that the challenge for this year would be to ensure macroeconomic stability whiles stimulating growth in the economy.
It said, “this appears to be quite tricky, and it would require proactive management of monetary and fiscal policies to avoid any surprises.” On interest rates, the Institute said that the rapid decline in interest rates could put undue pressure on the local currency. “We support the drive for a reduction in interest rates but it is our considered view that interest rates should be allowed to decline more slowly in order to be in tandem with growth in output of the economy.”
On fiscal policy, the Institute expressed concern about government financing most of the capital expenditures from donor funding. It explained that it might not be sustainable in the long-run and that more innovative schemes like “Build, Own, Operate and Transfer” (BOOT) should also be explored whereby private capital could play a role.
“We appreciate the need to increase revenue mobilisation, reduce leakages. While incentives are being provided, there is the need to put in place a more analytical framework, such that increased revenues that are not related to effort but form major price movements of exports and imports are not wrongly attributed to collections efforts.
“Additionally, during periods of shrinking revenues, the proposed incentive might prove inadequate. On HIPC, ICA recommended that a thorough cost-benefit analysis should be made so that real cost do not outweigh the reliefs.
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