Ghana’s Public debt projected to have hit 83% end-2021
Ranking Member on Parliament’s Finance Committee, Dr Cassiel Ato Forson, has indicated that per his calculation, Ghana’s public debt should have reached 83% of GDP by December 2021.
According to him, the Ministry of Finance failed to factor in some key elements when calculating Ghana’s public debt to GDP ratio thus creating a conservative image of the true reality of the country’s debt problem.
Speaking in an interview, he stated that the Finance Ministry had calculated that Ghana’s debt to GDP ratio was at 78% when in actual fact it should have been at 81%.
“As of November, the math points to the fact that it was 81% of GDP, yes I’ve heard the Ministry actually put it at 78% of GDP.
“But it is important for us to note that this excludes the Energy Sector Levies Bond (ESLA) bond. This excludes the Sinohydro money and the GETFund securitization, which we call the Daakye. It excludes them. If you’re to add all of them, you’re talking of 81%,” he said.
Dr Ato Forson explained that the conservative calculation done by the Finance Ministry significantly creates a smokescreen to the very dire situation the country’s economy is in.
“For instance, we have borrowed ¢9.3 billion on the back of Energy Sector Bonds, we have borrowed about ¢2.3 billion on the back of GETFund receivables. All of these, you’re using the same tax revenue to pay.
“So the tax revenue or revenue of ₵100 billion you’re reporting includes the Energy Sector Levies Act, the proceeds coming from there, but when it comes to the interest payment you’re excluding that and you are underreporting,” he said.
Moody’s on Friday, 4th February, 2022, downgraded Ghana’s long-term issuer and senior unsecured debt ratings to Caa1 from B3 and changed the economic outlook to stable from negative.
The downgrade to Caa1, it said, reflects the increasingly difficult task the government faces addressing its intertwined liquidity and debt challenges.
Recently, another ratings agency, Fitch, downgraded Ghana’s credit rating to B- from B and economic outlook to negative from stable.
“Weak revenue generation constrains government’s budget flexibility and tight funding conditions on international markets have forced the government to rely on costly debt with shorter maturity”, it explained.
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Meanwhile, the Director of the Financial Sector Division of the Finance Ministry says the rating agencies had failed to factor in government’s appeal concerning their report on the economy’s creditworthiness.
According to Sampson Akligoh, the government had engaged the agencies on some inaccuracies in their data collection process prior to the release of the report, however, it appears the agencies had failed to take those into account.
He stated that this is why the government is expressing strong sentiments against the downgrades and to tell their side of the story to investors on the international market.
“We also have to state our side of the story. So we presented, for example, maybe they’re saying that if you look at maybe our debt path, by the next three years the country’s debt to GDP is going to be this, we also have our debt sustainability analysis, we have our policy intent, that is very clear, and we disagree with the assumptions that underline their creditworthy rating.
“It is important that because you’re in the market we also have to state our side of the story because as a sovereign our job is to make sure that we also defend our [credit worthiness],” he explained.
Sampson Akligoh noted that it was normal for a government to disagree with a rating agency’s work, however, the rating agency cannot be compelled to change their ratings.
He added that appealing such a rating does not either assure that the rating will change or the downgrade reversed.
He stated that was the reason why the government was presenting its side of the story to the investor community for them to make a well-informed decision.
“We can disagree, and when we disagree, we make our point very known and our position is that the assumptions underlying a lot of the forecast, honestly, from our view is not accurate,” he said.
Meanwhile, he says the government has no intention to unsubscribe from Moody’s credit rating.
“Don’t look at it in terms of government disagreeing with Moody’s to the extent that we want to do away with Moody’s.
“Every analytical work of this nature it’ll come to a point where two people – because you’ll remember that the Ghanaian institutions, Ministry of Finance and Central Bank also have experts. In the Ministry of Finance, you have a debt management division, there’s also a credit…you know, people who look at credit in the Ministry of Finance, also we even have rating advisors.
“So it is not about saying that Moody’s has done something that you have to entirely avoid them but it is important that we make clear our point of disagreement with Moody’s,” he explained.
