Ghana’s total debt stock expressed as a percentage of its Gross Domestic product would reach 62 per cent by the end of this year.
That’s according to the latest IMF fiscal Monitor Report released in Washington DC at the on-going-spring meetings.
The Report reviewed the economic data of 189 countries based on what their staff have picked up during their mission visits and what governments have also published in terms of expenditure and revenue as captured in their budgets.
Ghana’s total debt stock and IMF’s projection
The projection should mean that in one year, Ghana’s Debt –to-GDP Ratio would increase by 4 per cent. This could be one of slowest growth in the ratio in a year in recent times.
The development could mean that government might not be taking on too much debt in 2019 or the economy could be expanding more to absorb the nominal increase in the debt numbers.
Government according to Bank of Ghana data released last month showed that it ended last year with a Debt-to GDP of 58 per cent, translating into a nominal value of¢173 billionª
However, some have argued that government decided to spend about over ¢10 billion “in bailout” fueled the huge jump in the Debt-to-GDP ratio for 2018. A
careful look at Central Bank’s Data also showed that the total debt stock increased from ¢142.6 billion ending December 2017 to 173.2 in December 2019, representing a 21 per cent Jump last year.
A development that some might say that it could support government’s claim that its debt re-profiling its working or call it debt management strategy.
But speaking to JOYBUSINESS’s George Wiafe in Washington DC at the on-going spring meetings, Assistant Director at the Fiscal Affairs at the IMF, Cathey Pattillo maintain that there is still more that government has to do despite witnessing one of the slowest growth in the debt-to-GDP ratio. She added that government must implement policy measures that would help improve revenue mobilization to finance its rising debts.
Government and the debt stock numbers
Government, on the other hand, has maintained that its debt re-profiling of “extending the yield curve” and taken up long-dated bonds at a fairly cheaper rate to finance the short term expensive debts would go a long way to reduce nominal debts numbers.
It has also spoken about some policy measures that it is undertaking which aid the expansion of the economy, like its “ One District-One-Factory Initiative” which would help with the country’s industrialization drive and boost exports.
According to the finance minister Ken Ofori Atta, government is also working to ensure that, these fresh debts are channelled into infrastructure project which would again pay for itself.
In the 2019 budget, the finance minister again noted that; the medium The strategy will focus on an appropriate financing mix aimed at “supporting fiscal consolidation without compromising macroeconomic stability”.
The minister also noted that the Strategy also envisages the issuance of medium-term domestic instruments to help address cost associated with the financial sector clean-up.
Implications of high Debt-to-GDP ratio for Ghana
Generally, Government debt as a per cent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields.
So for some, a high debt to GDP ratio could result in investors asking for high interest or yields, anytime government goes out to borrow. This is because our debts are getting to levels that are equal to the value of Ghana’s economy, which is peg at about ¢270 billion.
According to the 2018 budget, government is planning to set aside about 18.6 billion cedis as interest payments on the loans. Of this amount, domestic interest payments will constitute about 77.8 per cent and amount to GH¢14,504.9 million