Ghana Debt Hits GH¢70bn

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Created on Thursday, 20 November 2014 00:00

Ghana Debt Hits GH¢70bn

Ghana’s total public sector debt stock which stood at GH¢65.7 billion at end of August increased to GH¢69,705.90 million (US$21,733.51 million) at end of September 2014.

Seth Terkper, Minister of Finance, who disclosed this yesterday in Parliament while presenting the 2015 Annual Budget Statement, mentioned the components of the debt stock as GH¢40,644.15 million (US$12,678.62 million) and GH¢29,041.75 million (US$9,054.89 million) for external and domestic debt respectively.

“Ghana’s public debt stock as a percentage of GDP has been rising over the years. It increased from 36.3 percent in 2009 to 48.03 percent in 2012 and further to 55.53 percent in 2013.”

“As at end of September 2014, the debt stock stood at 60.8 percent, largely on account of increase in external net disbursements for infrastructure projects and net domestic issuance, and the depreciation of the cedi.”

It would be recalled that Government recently denied media reports that its debt-to-GDP ratio had crossed 60 percent.

The International Monetary Fund (IMF) has also indicated that low-income economies whose debt-to-GDP ratio transcend 60 percent face grave risks of falling into deeper economic mess.

By the afore-stated, Ghana’s debt-to-GDP ratio currently stands at 60.8 percent. And this means that Ghana’s economy is not capable of producing and selling sufficient goods and services to pay back her debts.

Government has mostly relied on taxes from the importation of goods and services to run its operations to the detriment of the export sector which has been denied the much-needed funds to thrive effectively.

Mr Terkper mentioned that the current debt situation of the country was exclusive of loans that were being contracted by government and other state agencies.

Some of the loans Government contracted, he said, were used in financing the construction of projects including the Kwame Nkrumah Interchange, University of Ghana Teaching Hospital and also the Legon-Madina Interchange.

Endless Challenges

The Finance Minister complained about certain major exogenous setbacks that affected government’s ability to deliver on its promises to Ghanaians immediately after it assumed office.

These include the continued disruption in the supply of gas from the West African Gas Power Pool (WAGP) from August 2012 through August 2014 due to the damage caused to the pipeline.

“This has had significant adverse effects on power supply, national output, foreign exchange reserves, and tax revenues.

He also said the fall in gold and cocoa prices has had similar effects and required sacrifices by our hardworking cocoa farmers, as well as government in the form of curtailed producer price and export duty respectively.”

He added that the slump in petroleum prices during the third quarter of 2014 benefitted government’s automatic adjustment policy.

“Mr. Speaker, besides the continuing adverse impact on national output as well as losses in foreign exchange and tax revenues, these latter setbacks had a major impact on the value of the Cedi in early 2014. It took several additional bold efforts and the reversal of compliance measures announced by the Bank of Ghana (BOG) to reverse and stabilize the currency.”

Plans to combat challenges

Mr Terkper said Government was poised topropose amendments to enhance effective implementation of the Petroleum Revenue Management Act 2011, (Act 815) to harness our oil resources for savings, stabilisation and development.

It also intends to outline firm policies for the energy sector, including the implementation of the over US$400 million US MCC Compact II under the Power Africa Programme that is planned to attract significant private investment into the energy sector;a major overhaul of the pricing, tax and levy structure for energy utilities and petroleum productsandavigorous use of alternative financing instruments for energy and non-energy investments, mainly the insurance and Partial Risk Guarantee (PRG) tools of the World Bank and the African Development Bank (AfDB) to boost private sector participation in the sector, among others.

Every Ghanaian could pay between GH¢2,800 and GH¢3,000 as their commitment to paying the country’s total debt.

By Samuel Boadi

Source: Daily Guide/Ghana