Ghana risks becoming debt-distressed – Pierre Laporte
World Bank Country Director for Ghana, Liberia and Sierra Leone, Pierre Laporte, has said Ghana risks becoming a debt-distressed country, given its high debt levels.
Making the assertion on Accra-based Class FM the Country Director noted that Ghana being at high risk of debt-distress makes the country more prone to debt defaults.
“Ghana’s economy before Covid was one of the highest growing economies in the world actually and we are talking about 6 or 7 per cent annually”.
“Of course, COVID-19 hit Ghana like it hit everyone [but] the encouraging thing is that most countries in the world also declined in growth in 2020 and Ghana happened to be one of the two countries that still recorded a small positive growth because it handled the COVID-19 economic effect better than others and also what we observed is that the recovery has been stronger than the rest of the region.”
“However, Ghana’s debt is quite high, latest figures show that Ghana’s debt-to-GDP ratio is close to 80 per cent or about 70 per cent and it should be noted that before COVID, it was a bit lower than that; it was in the 60s, so, COVID-19 has contributed to Ghana’s debt like every country in the world.”
“So, what we are saying is Ghana is at a high risk of debt distress. What this means is that Ghana is more at risk of going to default or distress if certain things happen. For instance, Ghana depends on oil, so, if oil prices were to crush, this will put Ghana in a much more uncomfortable position vis-à-vis payment of its debt.”
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“If gold prices or commodities Ghana export go down, if for whatever reason domestic revenue, which are already very low, go so low because of a shock, then Ghana will have trouble fully servicing its debt,” stated Mr Laporte.
Ghana, prior to the COVID-19 pandemic, recorded positive growth and was considered as one of the fastest-growing economies in the world. The country’s high growth rate for 2020 was however curtailed by the pandemic.
Ghana however, managed to record a modest 0.4 percent GDP growth at the end of 2020 whereas its peers on the African Continent recorded negative growth rates for last year.
Presently, the country’s public debt stock stands at Ghs 334 billion or 77.1 percent of GDP after surging by some Ghs 27.8 billion within the space of one month – April 2021 to May 2021.
The country’s debt stock according to Fitch Ratings, is expected to continue on an elevated path reaching 81.5 percent this year, 83.2 percent in 2022, and further to 84.8 percent, 86.0 percent and 86.6 percent in 2023, 2024 and 2025 respectively.
The country’s debt stock will however, reduce by 1.1 percentage points in 2026, ending 2026 at 85.5 percent.
