Ghana’s total public debt declines – Bank of Ghana
Ghana’s public debt has declined, says the Bank of Ghana. According to the central bank, the total public debt declined from 69.8 per cent of GDP (GH¢142.5 billion) at the end of 2017 to 60.0 per cent of GDP (GH¢145.0 billion) at the end of February 2018, reflecting a higher GDP base.
“Of the total, domestic debt was GH¢68.2 billion (47.0 per cent of total debt) and external debt was GH¢76.8 billion (53.0 per cent of total debt),” Dr. Ernest Addison, the Governor of the central bank said, Monday May 21, 2018.
He indicated that the favourable external developments from last year continued into the first quarter of 2018, adding that prices of Ghana’s major exports have firmed up across board.
“Crude oil prices have increased by 11.5 per cent since the beginning of the year to an average of $71.7 per barrel in April 2018 due to oil supply constraints amid geopolitical and trade tensions. Similarly, gold prices gained 5.4 per cent to $1,334.9 per fine ounce, supported by rising inflation expectations, pickup in jewellery demand and general trade tensions. Cocoa prices are also rebounding due to improved grinding data and cut back in cocoa production. Cocoa prices firmed up by 39.8 per cent to $2,664.0 per tonne in April 2018,” he said.
According to Dr. Addison, these developments translated into positive trade and current account balances.
He noted that provisional external trade balance for the first four months of 2018 was a surplus of $1.1 billion (2.2 per cent of GDP) reflecting higher export receipts, mainly from crude oil. This compares with a surplus of $1.2 billion (2.5 per cent of GDP) recorded over the same period in 2017, he said.
He stated that the current account also recorded a surplus of 0.5 per cent of GDP in the first quarter of 2018. However, the capital and financial account recorded a net outflow which more than offset the current account surplus, resulting in an overall balance of payments deficit of 1.2 per cent of GDP compared to a deficit of 0.9 percent of GDP in the same period last year, he said.
“The Gross International Reserves (GIR) position at the end of March 2018 was a drawdown of $513.9 million in line with the projected cashflow for the period. However, the recent Eurobond issued has raised the level of international reserves to $8.1 billion (4.4 months of import cover) as at May 17, 2018, providing enough cushion against any potential external vulnerabilities,” he said.
In line with the strong external payments position, he said, sustained improvement in the macro fundamentals and improved liquidity, the foreign exchange market has remained calm.
“The cedi appreciated by 0.02 per cent against the US dollar in the year to May 18, 2018 compared to a depreciation of 0.97 per cent in the same period of last year. Despite the marginal nominal appreciation of the cedi against the US dollar, the real effective exchange rate (in trade-weighted terms) depreciated by 0.9 per cent over the first four months of the year showing that the cedi remains competitive and broadly aligned with the underlying fundamentals,’ he said.
According to the Governor, there is evidence to show that some stabilisation and consolidation especially with respect to inflation and exchange rate expectations are taking hold. The fiscal and monetary policy mix and the corrective measures implemented to put the economy back on track are beginning to yield positive results. Headline inflation has declined steadily from 11.8 per cent in December 2017 to 9.6 per cent in April 2018, the lowest since 2013 and within the medium-term target band of 8±2 percent, he said.
He pointed out that underlying inflation pressures have also been contained as reflected in the Bank’s core measures of inflation and inflation expectations.
“The main core inflation measure, which excludes energy and utility, declined from 12.6 per cent in December 2017 to 10.4 per cent in April 2018, converging toward the headline inflation. Evidence from the weighted inflation expectations by businesses, consumers and the financial sector also support the above.
Money market interest rates have continued to ease. In April 2018, rates on the 91-day Treasury bill instrument declined to 13.3 per cent from 16.5 per cent a year ago. Similarly, the 182-day instrument declined to 13.9 per cent from 16.8 per cent, while the 1-year note also dropped to 15.0 per cent from 18.3 per cent over the same comparative periods. Also, the weighted average interbank rate, the rate at which commercial banks lend to each other, declined further to 17.5 per cent in April 2018 from 23.3 per cent a year ago,” he added.
He said, private sector credit extension, though recovering, remains subpar due to on-going balance sheet restructuring by banks and adjustment of the monetary data to exclude the resolved banks. As a result, growth in credit to the private sector was 5.6 per cent year-on-year in April 2018 compared with 16.1 per cent a year earlier. In real terms, private sector credit contracted by 3.6 per cent in April 2018 against 2.6 per cent growth in the same period of 2017.
“These notwithstanding, the latest credit conditions survey showed an overall net easing in banks’ credit stance on loans to both households and enterprises. This was attributed to the improved macroeconomic environment – declining monetary policy rate and anchored expectations. In addition, new advances (loan demand) in the banking sector rose by 27.6 per cent year-to-date in April 2018 compared with 1.3 per cent growth in the same period last year,” he said.
By Emmanuel K. Dogbevi