Governor of the Bank of Ghana Dr. Ernest Addison has stated that the current debt-to-GDP ratio of 71 percent could be an indication that government is approaching its limit when it comes to the implementation of its COVID-19 related interventions meant to cushion Ghanaians and businesses against the adverse impact of the global pandemic.
Apart from providing free water to the general public as well as free electricity to lifeline customers as part of efforts to cushion Ghanaians against the hardship brought on by the Coronavirus pandemic, Government has also given out billions of cedis to small, medium and large scale enterprises to ensure they thrive.
All these interventions coupled with other financing needs have pushed Ghana’s total public debt stock to GHS273.8 billion as at the end of September 2020.
Commenting on the high debt figure, Dr. Ernest Addison questioned if there will be enough fiscal space to support the COVID-related interventions in 2021.
“Government has been able to cushion households and support businesses in the era of COVID-19. All of the interventions demand money, and they have to be financed, and we are financing them through the issuance of bonds. This is why we are seeing the interest rates on the longer-dated instruments going up and this is what accounts for the debt stock rising to 71 % of GDP.”
“The important point I think is whether the government will have the same fiscal space to be able to continue providing these supports in 2021, because really, we are getting to the limits of what the government can do, without trying to mobilize domestic resources,” he added.
Public debt hits GHS 273.8 billion
Ghana’s total public debt stock has risen by GHS54.8 billion in the first 9 months of 2020, hitting GHS273.8 billion as at the end of September 2020, adding pressure on the government to slow down the rate of debt accumulation.
The new debt figure pushes Ghana’s debt to GDP ratio to 71 percent, crossing the dreaded 70 percent threshold for the first time since December 2016 when the figure stood at 73.3 percent.
According to the latest Summary of Macroeconomic and Financial Data from the Bank of Ghana, the total public debt stock which started the year at GHS219.6 billion, has increased by 26.7 percent in nine months.
Debt accumulation for the first 9 months of 2017, 2018 and 2019, however, rose by 8.9 percent, 17.2 percent and 18 percent respectively.
A breakdown of the debt numbers shows that GHS138.5 billion of the debt were secured from outside the country, this is about 35.9 per cent of the total value of the economy. On the other hand, GH¢135.3 billion was secured locally. This represents 35.1 per cent of GDP.