Former Finance Minister, Seth Terkper, has said Ghana’s public debt stock is likely to reach 80 per cent of Gross Domestic Product (GDP) in the first quarter of 2021.
Mr Terkper is of the view that, with Government planning to borrow over Ghs 32 billion from both foreign and domestic sources in the first quarter – despite needing only Ghs 10.7 billion deficit financing – the country’s debt situation is going to worsen.
The former Finance Minister also disputed claims by the incumbent Finance Minister, Ken Ofori-Atta, that fiscal deficit for end 2021 is projected to be 8.3 per cent, stating that Government is deliberately concealing the deficit situation to avoid public displeasure at the ballooning debt.
According to him, fiscal deficit for end-2020 will be between 13-15 per cent.
“The deficit will hit about 13-15 percent at the end of the year because of some financing that was excluded, and that will increase your debt. If you are currently at 77 percent of debt to GDP, according to the IMF and Fitch, then your debt will hit 80 percent in the first quarter.”
“Your financing should be equal to your deficit, but in this case the financing is higher than the deficit. What it means is that a portion of it is going into expenditure that has not been disclosed. If indeed government will need Ghs 10 billion, then why are they borrowing Ghs 32 billion? So, we are in for a surprise. This year they are blaming everything on COVID-19, but if you look at the figures well, it has nothing to do with it,” he stated.
“If you look closely at the budget and you add compensation of employees and interest payment in the first quarter, you realise that the amount is higher than the total revenue. It means that your total revenue is not even able to pay your compensation and interest, let alone principal for the debt.”
“So you are going to borrow to pay interest, and you are going to borrow to pay the entire debt. What if you don’t get the money? It means you can’t service your debt. And this is exactly what happened and they had to go to the Bank of Ghana,” he added.
Mr Terkper advised Government to develop serious plans aimed at slowing the rate of borrowing and increase revenue, else the country’s debt situation will eventually get out of hand.
Ghana’s public debt stock as at July this year stood at 68.3 per cent of GDP, a figure the World Bank says puts the country at high risk of debt distress.
The IMF, in its October Regional Economic Outlook, projected the country’s total debt to increase to 76.7 per cent by the end of 2020 causing the Bretton Wood Institution to express concerns over the country’s worsening fiscal situation and ballooning public debt.