Accra, Ghana, July 19, 2019//-Recent figures released by the Bank of Ghana (BoG) revealed that the government has, within a month, added GH¢1.6 billion to the country’s debt stock.
This brings the country’s total debt (both domestic and foreign) to GH¢200.0 billion, representing 58.1 percent of GDP as at the end of May 2019, up from GH¢198.4 billion (57.6 percent) recorded in April, this year.
Of the total public debt, domestic debt of GH¢ 94.6 billion constituted 27.5 percent of GDP, while external debt of GH¢ 105.4 billion constituted 30.6 percent of GDP.
The figures were contained in the Bank of Ghana’s economic and financial report for the first five months of 2019.
With the current total public debt stock, it implies that Ghana loses 58.1 percent of its GDP to the ever-growing public debt. GDP is defined as the total market value of all final goods and services produced in a country in a given period, usually a year or quarterly.
Every Ghanaian owes over GH¢6,667
Ghana, with an estimated population of 30 million people, which when divided by the current public debt, every Ghanaian would owe over GH¢6,667 to the country’s creditors, both internally and externally, as of May 2019.
Public debt accrues over time, when the government spends more money than it collects in taxation, and as a government engages in more deficit spending, the amount of public debt increases. That is the exact sad story of Ghana, according to economists.
Widening Debt-Trap
Economists maintained: “As it stands now, the government cannot immediately get out of the debt-trap, because maturing obligations cannot be paid out of its relatively low revenue base.
“Restructuring of the debt from short to long term may bring some respite, but can only be sustainable if the short term relief is combined with strong fiscal consolidation.
“While swapping old debts with new ones, it is important that any surplus of the new debt, over and above the old debt, goes into projects that can pay for themselves.
“Otherwise, the restructuring would only lead to growing the debt without a corresponding growth in productivity or GDP, leading to a worsening situation of the debt-to-GDP ratio”, according to them.
An analysis of the country’s revenue base as a percentage of GDP, and the interest payment as a percentage of revenue, shows that the current level of public debt-to-GDP ratio may not be sustainable.
Given the country’s relatively low levels of revenues, vis-à-vis high and rising expenditure, the high debt-to-GDP ratio may make it more difficult for Ghana, in the medium term, to pay its debts.
This high debt, with its attendant high interest, contributed in creating a panic in the domestic and international markets, and credit rating agencies had to reduce Ghana’s rating further downwards.
With this high level of borrowing by the Akufo-Addo-led government, there is little to show in terms of development projects, according to opposition politicians.
By Masahudu Ankiilu Kunateh, African Eye Report
