Ghana’s total public debt rises

By Elorm Desewu
Ghana’s total public
debt has continued to balloon further recording GHC273.8 billion or US$48.0
billion representing 71 percent of Gross Domestic Product, (GDP), during the
first, nine months of 2020, compared with GHC209 billion or 39 percent of GDP
during the same period last year, according to data from the Bank of Ghana,
(BoG).
The external component of the debt has risen slightly to
US$24.3 billion or GHC138.5 billion representing 35.9 percent of GDP compare
with US$20.3 billion which was 30.8 percent of GDP during the same period last
year.
The domestic debt component of the total debt has also risen to
GHC135.3 billion representing 35.1 percent of GDP compared with GHC101.4billion
recorded during the same period last year.

Already, the Institute of Economic Affairs, (IEA), has
expressed worry over Ghana’s growing debt which is likely to hit a record high
of GHC270 billion, representing 70 percent of Gross Domestic Product, (GDP) by
the end of 2020.
According to Dr John Kwabena Kwakye, a Research Fellow at the
IEA, the government needs to adopt a comprehensive debt management strategy,
including restructuring, refinancing (or re-profiling) and debt buybacks.
The Finance Minister reported that the Ghana’s public debt
stood at GH¢ 258.3 billion or 67.0% of GDP at the end of June during the
midyear budget presentation to Parliament. “But going by the additional
financing estimated for the second-half of the year, the debt level could reach
GH¢ 270 billion or about 70% of GDP at the end of 2020.
Borrowing to fill the resource gap is inevitable since it is
necessary to save lives, livelihoods and the economy. It is, indeed, a
necessary evil—it has to get worse before it gets better” Dr Kwakye said.
According to the medium-term fiscal and economic growth
profiles, the debt ratio could stay above the 70% level, deemed to be the
sustainability threshold for countries like Ghana, until 2022. The servicing
costs of the debt are also going to be substantial. In 2019, debt servicing
used up as much as 46% of tax revenue and if this should escalate further, the
fiscal space would be considerably narrowed.
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