Ghana adds GH¢136b to public debt within four years as figure rises to GH¢258b

Ghana has added GH¢136 billion to its public debt raising the figure to GH¢258 billion in four years as at June 2020.

In February 2017, the President, Nana Addo Dankwa Akufo-Addo, said Ghana’s total debt stock had risen from GH¢9.5 billion in 2009 to GH¢122 billion by the end of 2016, representing 74 per cent of the Gross Domestic Product (GDP).

As a result of this, he said there was no fiscal space left for borrowing to meet the development aspirations of Ghanaians because of the unprecedented high debt stock of the nation, and added that any attempt to borrow to meet national development needs, was, indeed, unsustainable. The president said these when he gave his first state of the nation address to Parliament on becoming president.

President Akufo-Addo explained that more debt was accumulated by the previous NDC-led government in the last eight years, than all other governments put together since independence, explaining that 92 per cent of the country’s total debt stock was incurred during that period.

He said the interest cost on these debts had also increased to GH¢14.1 billion in 2017.

But the country’s public debt stock rose to GH¢255,727.1 million, representing 66.36 per cent of GDP, according to the Minister of Finance, Ken Ofori-Atta during the 2020 mid-year budget review in Parliament on Thursday, July 23, 2020.

The Minister of Finance said the increase was mainly as a result of a Eurobond issuance of $3.0 billion in February 2020, exchange rate depreciation, frontloading of expenditures and the COVID-19 effect which increased the cedi equivalent of the outstanding debt stock.

He gave the breakdown as follows; the total debt stock was made up of GH¢134,888.9 million ($23,992.6 million) and GH¢120,838.3 million ($21,493.4 million) of external and domestic debt accounting for approximately 52.7 per cent and 47.3 per cent of the total public debt stock, respectively.

As a percentage of GDP, external and domestic debt represented 35.00 per cent and 31.36 per cent, respectively, he said.

However, Mr Ofori-Atta added that on refinancing risk, the average time to maturity in the entire public debt portfolio had improved from 7.7 years to 9.8 years from 2016 to 2019, but of more significance was the external debt, where the average time to maturity improved from 9.3 years to 12.4 years from the period 2016 to 2019.

Debt maturing in a year as a percentage of the total debt stock has reduced from 28.1 percent to 15.3 percent from 2016 to 2019. The level of external debt maturing in one year as a percentage of the total external debt stock had improved from 7.2 percent to 4.7 percent.

He however indicated that the nation’s performance on the domestic debt stock maturing in one year which witnessed significant reduction from a high of 54.5 per cent in 2016 to as low as 28.1 per cent in 2018 saw an uptick in 2019 to 31.7per cent.

This, he said, was as a result of increased tap-ins to existing debt instruments to address the crystalisation of contingent liabilities.

On interest rate risk, the Finance Minister said the average time to re-fixing (ATR) the portfolio improved from 7.2 years to 9.5 years from 2016 to 2019.

For external debt, the ATR improved from 8.6 years to 12.0 years for 2016 to 2019.

The Bank of Ghana Monetary Policy Committee, however issued a press release on July 27, 2020 which said the elevated fiscal deficit path has impacted the stock of public debt which rose to 67.0 per cent of GDP (GH¢258.0 billion) at the end of June 2020 compared with 62.4 per cent of GDP (GH¢218.2 billion) at the end of December 2019. Of the total debt stock, domestic debt was GH¢122.1 billion (31.7 percent of GDP) while external debt was GH¢136.3 billion (35.4 percent of GDP).

Reports by the International Monetary Fund (IMF), the World Bank and the African Development Bank (AfDB) since 2017 have all described Ghana as in high risk of debt distress.

According to the World Bank, higher debt burdens and the increasing exposure to market risks raised concerns about debt sustainability.

This year 2020 being an election year, coupled with the COVID-19 pandemic are likely conditions for the public debt ballooning beyond the current figures.

By Emmanuel K. Dogbevi

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