Gov’t projects debt-to-GDP ratio reduction to 55% by 2028
President Akufo-Addo has revealed plans to reduce the country’s public debt stock to 55% of GDP by 2028.
In addition to reducing the country’s public debt stock, government further intends to reduce external debt servicing to 18% of total revenue by 2028.
The projected debt to GDP ratio indicates a 13% percentage points decrease in the country’s public debt from the current 68% debt-to-GDP – this is per official data by the BoG. The IMF however, pegs the country’s public debt at 94% of GDP.
Speaking in a televised address on Sunday, October 29, 2022, the President noted that government is committed to increasing tax revenue from the current 13% of GDP to between 18% to 20% by 2028.
“To restore and sustain debt sustainability, we plan to reduce our total public debt to GDP ratio to some fifty-five percent (55%) in present value terms by 2028, with the servicing of our external debt pegged at not more than eighteen percent (18%) of our annual revenue also by 2028.
“We are committed to improving the revenue collection effort, from the current tax-revenue to GDP ratio of thirteen (13%) to between eighteen and twenty percent (18-20%), to be competitive with our peers in the West Africa Region. The GRA is rolling out an extensive set of measures to support this enhanced revenue mobilisation. All of us must do our patriotic duty, and support the GRA in this exercise.
“We are aiming to restore and sustain macroeconomic stability within the next three (3) to six (6) years, with a focus on ensuring debt sustainability to promote durable and inclusive growth while protecting the poor,” the President remarked.
Moody’s projects 26% increase in debt as debt-to-GDP to hit 104% at end 2022
Credit rating agency, Moody’s, has forecasted Ghana’s debt to increase by some 2,600 basis points (26%) by the end of 2022.
According to the rating agency, Ghana’s debt will rise to 104% of GDP by the end of this year.
Accounting for significant rise in the country’s debt, Moody’s asserts, will be the depreciation of the cedi which has so far declined in value by some 4,000 basis points (40%) to the dollar.
“The local currency, the cedi, has depreciated by around 40% against the US dollar since the start of the year, exacerbating the challenges from an already high debt burden. Because foreign currency-denominated debt accounted for 37% of GDP at end of 2021, Moody’s forecasts that the currency depreciation over 2022 will be the main contributor to the rise in the debt-to-GDP ratio this year to more than 100% of GDP (104%, 26 percentage points higher than in 2021),” Moody’s stated in its recent downgrade of the country’s credit rating from Caa1 to Caa2.
