With less than three months to end the year, the World Bank is projecting a significant rise in Ghana’s total public debt for this year.
According to the Bretton Wood’s institution October 2020 Africa Pulse Report, this is due to the widening fiscal deficit as a result lower revenue and high expenditure brought about by covid-19.
The country’s debt has already hit GHc263 billion, about 68.3 per cent of Gross Domestic Product in July 2020.
Ghana still remains a high risk debt distress country, according to the World Bank’s analysis. Neighbouring Ivory Coast is however classified as having moderate debt levels and in the moderate risk category.
The Sub Saharan Africa region’s level of public debt will however hit 63.1% of GDP in 2020.
The World Bank said sustainability of post-COVID-19 would depend on the ability of Sub-Saharan African countries to alleviate their mounting debt burdens and create increased fiscal space.
According to volume 21 of the Africa’s Pulse, the World Bank said effective economic policies, which include macroeconomic and debt management, would increase a country’s capacity to repay its debts.
“Enhancing debt management requires better debt transparency and improved efficiency in the use of borrowed resources to expand the fiscal space”, it said.
According to myjoyonline the report also emphasised that creating fiscal space would help the economy cushion the effects of the pandemic crisis and avoid a deeper recession—including in countries with less diversified economic structures.
Additionally, managing a country’s borrowing patterns will reduce the risk profile of debt and may help alleviate the adverse growth effect of the pandemic shock, it added.
Components of debt
The external component of the GHS263 billion debt is estimated at GHS138 billion [$24.3bn], representing 35.8 per cent of GDP.
The domestic component of the debt is also estimated at GHS125.1 billion, approximately 32.5 per cent of GDP.
The financial sector resolution bond however constitutes GHS14.2 billion, which is equivalent to 3.7 per cent of GDP.
Ghana is expected to pay about GHS26 billion on interest payments for this year alone.
This will be a little over GHS6 billion interest payments in 2019. Last year, interest payments cost the nation about GHS19.756 billion on loans borrowed.
Out of this, GHS4.60 billion was spent on the external debt, while GHS15.156 billion was used to service loans contracted from the domestic market.