Fitch Rating: Interest payments to exceed 45% of Ghana’s revenue from 2022 to 2024
Interest payments on loans is projected to exceed 45% of Ghana’s revenue from this year to 2024.
The projection by Fitch Ratings, comes on the back of high yields on domestic debt for this year, which is expected to continue over the next two years.
“Interest costs largely reflect high yields on domestic debt. Yields have climbed higher in 2022, following inflation spikes and monetary tightening by the Bank of Ghana (BoG).
“Yields on the 91-day treasury bill reached 26% in July 2022, up from 12.6% in July 2021. Moreover, the government has reported under-subscribed yields, necessitating the tapping of existing medium-term issuance,” Fitch noted.
The rating agency added that the government has increased its outstanding advances with the Bank of Ghana, providing some additional domestic financing and could conduct another private debt placement with the Central Bank as it did in 2020.
However, the rating agency said, such a measure would necessitate parliamentary approval.
Indeed, yields on T-bills have surpassed 27% and that could increase interest cost further.
The government in the first five months of this year spent GHS 17.84 billion to service interest and amortisation on debt, the Bank of Ghana indicated in its July 2022 Monetary Policy Report.
This was higher than the envisioned target of GHS 16.54 billion.
Domestic interest payments as of May 2022 accounted for 76.7% of the total interest payments.
