World Bank Country Director Warns Ghana Over Ballooning Debt As He Leaves

Henry Kerali, Outgoing World Bank Country Director for Ghana

Accra, Ghana, June 10, 2019//-The World Bank Country Director for Ghana, Liberia and Sierra Leone, Henry Kerali has observed that Ghana’s ballooning debt stock is one of the major challenges confronting the country’s economy which needs to be tackled immediately.

Mr Kerali whose mission to Ghana ends on June 30th 2019, made this known in his last interaction with members of Institute of Financial and Economic Journalists (IFEJ) in Accra, today.

He therefore advised the management of the Ghanaian economy to take bold steps reduce the country’s appetite for non-concessionary loans (debt).

According to the Bank of Ghana’s latest financial data, Ghana’s debt stock stood at $38.9 billion (GHS198 billion) which is left GHS2 billion to reach GHS200 billion as of March 2019.

According to the Bank of Ghana’s latest financial data, Ghana’s debt stock stood at $38.9 billion (GH¢198 billion) which is left GH¢2 billion to reach GH¢200 billion as of March 2019.

The debt stock represents 57.5 per cent of Ghana’s GDP as of March 2019. In January this year, the country’s total public debt was GH¢176.6 billion (US$35.7 billion) and GH¢180.7 billion (US$35 billion) for February.

The figures revealed that a total of GH¢21.4 billion was added to the public debt in the first three months of 2019.The current debt of  GH¢198 billion) is inclusive of the US$3 billion Eurobond issued by the government in March this year.

Components of debt

Of the total public debt of GH¢198 billion, GH¢11.0 billion (or 3.2% of GDP) represented bonds issued to support the financial sector clean-up. While GH¢92.8 billion and GH¢105.2 billion are domestic and external debt respectively.

With the total public debt stock standing at GH¢198 billion (57.5 percent of GDP), it implies that Ghana loses 57.5 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¢7,071

  Ghana, with an estimated population of 28 million people, which when divided by the current public debt of GH¢198 billion, every Ghanaian would owe over GH¢7,071 to the country’s creditors, both internally and externally, as of March 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.

But the government denied the claims by the Minority in Parliament that it has, within two years, added GH¢80 billion to the country’s public debt stock.

Widening Debt-Trap

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.


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.

Low Revenue to GDP Ratio

The total tax revenue to GDP ratio for most developed countries is about 40%, but the total revenue for Ghana, from January to May 2019, was low.


According to the BoG, provisional data for the first quarter of 2019, showed an overall deficit (on cash basis) of 1.8 percent of GDP against the target 4 of 1.4 percent of GDP and a primary deficit of 0.8 percent of GDP compared to a targeted deficit of 0.3 percent of GDP.


The higher-than-projected fiscal deficit outturn was due to the lower-than-projected domestic revenue collections which were not accompanied by expenditure rationalization. The revenue shortfalls were mainly from personal income taxes, import duties and levies, and non-tax revenues. Over the quarter, total revenue and grants amounted to GH¢10.1 billion compared with the programmed target of GH¢12.4 billion. Total expenditures was GH¢16.5 billion, slightly below the target of GH¢17.3 billion, and representing a 37.7 percent annual growth.

By Masahudu Ankiilu Kunateh, African Eye Report




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