Former Finance Minister, Seth Terkper has said sovereign credit rating agency, Moody’s, is right with its 80 per cent debt-to-GDP projection for Ghana.
According to the former minister, the ever rising debt of the country comes on the back of stagnating domestic revenue mobilization and fast rising expenditure – expenditure which are mainly financed through bilateral and multilateral loans – on the part of government.
“In 2018, 2019 and 2020, the projected revenue collection by government were Ghs 47 billion, Ghs 54.6 billion and Ghs 67.1 billion respectively, but in 2020 when Covid hit it was reduced to Ghs 53.7 billion. In the Appropriation budget, revenue target is Ghs 66 billion. Expenditure on the other hand in 2018, 2019 and 2020 were Ghs 58.2 billion, Ghs 70 billion and Ghs 84.5 billion and in the Appropriation budget, government’s expenditure for Q1 totaled Ghs 103 billion for just Q1 2021,” he stated.
“Now this is an economy that has never mobilized Ghs 50 billion in revenue, and while we keep failing to meet our revenue targets, we keep increasing our expenditure and so obviously our deficit is going to go up and we would have to go and borrow to finance it and that increases our debts,” he added.
He continued saying: “We spend over 100 per cent of our tax revenue on only 2 things; compensation and interest payments and that excludes debt repayment and others. So it is on these basis that Moody’s and Fitch are projecting a debt-to-GDP ratio of 80 per cent for the country and I agree with them because I had already said that Ghana’s debt is going to balloon to 80 per cent.”
Mr Terkper made the above statements while sharing his outlook on the Ghanaian economy for 2021.
Moody’s has projected Ghana’s total debt stock to reach 80 per cent of Gross Domestic Product (GDP) by the end of 2021.
According to the credit rating agency, Ghana’s economy will come under pressure with rising debts with the greatest vulnerability to external debt-stress pressure.
Despite the country’s economic rebound in growth in 2020, Moody’s has said Ghana’s debt will continue to rise as the country’s borrowing requirements are high.
With domestic revenue mobilization expected to remain low, repayment of bilateral and multilateral loans will be difficult for the country.
Speaking further, Mr Terkper who is currently the lead partner for tax firm, PFM Tax Africa, expressed disappointment in the current government for allowing the nation’s debt to get out of hand.
He is of the view that the incumbent government had a lot of fiscal resources at its disposal – mainly the oil revenue – prior and even during the Covid-19 pandemic – drawdowns from the Stabilization Fund and fiscal support from IMF, World Bank – and as such should not have allowed the nation’s debts to continually increase to this point.
“Government had opportunities to do better in its first term, it could have done better,” he said.
