In the coming weeks, part of the outstanding debt on-lent to public entities – and which has led to GHc 379.6 million in bad loans – are expected to be written off by government.
This has been necessitated as efforts to recover these loans have proven to be expensive compared with the amounts that have been actually recovered.
According to the 2018 Annual Public Debt Report presented to Parliament by the Ministry Of Finance, it has put in a request for debt write-offs to Cabinet and Parliament for approval.
As at end-December 2018, the total outstanding debt on-lent to various public entities amounted to GH¢14,867.4 million, out of which an amount of GH¢4.4 million was recovered under existing on-lending facilities.
The list of non-performing loan receivables in the Public Accounts which government now intends to write off was informed by the audit observations and recommendations by the Ghana Audit Service (GAS), which is in accordance with Section 53(1) of the PFM Law.
The report notes that recoveries on significant portions of signed on-lent agreements are yet to kick in, since their grace periods are yet to elapse.
Currently, the Ministry is still auditing other on-lent facilities, and will continue to furnish Parliament with updated information.
In 2018, the Ministry issued no new guarantees, as it focused on strengthening its credit risk assessment framework, which is expected to forestall future potential contingent liability risks of Government in extending guarantees to entities.
The outstanding stock of Government guarantees as at end-December 2018 amounted to about GHc 2,348.9 million.
Credit Risk Assessment
As part of the effort to manage fiscal risk arising from issuance of guarantees and on-lent facilities to public entities, a credit risk assessment framework has been developed and operationalized.
The current framework is used to assess new requests for guarantees and on-lending facilities, and this has been applied to some selected energy sector entities in 2018.