Ghana: Debt-to-GDP projected to hit 83% this year
Ghana’s public debt is expected to continue to rise in the remaining quarters of 2022 with total public debt forecasted increase from the current 78% to 83% end-2022.
At end-2023, total public debt is further projected to reach 84.5%.
This is per a new report by Fitch Solutions on Ghana’s economy.
“As Ghana has effectively been cut off from international capital markets, the country will have to rely on domestic debt issuance over the short term although Ghana’s domestic debt market is relatively shallow and banks are already highly exposed to government debt,” said Fitch Solutions.
“As such, a rise in domestic debt issuance over the coming quarters could crowd out the private sector, weighing on growth”, it further pointed out.
It however concluded that Ghana’s public expenditure will fall to 23.8% of GDP, from 25.2% in 2022, in line with the government’s medium-term fiscal consolidation objectives.
The rate of increase of Ghana’s debt slowed down in the first half of 2022. It went up marginally by GHS 130 million to GHS 393.4 billion in June 2022, about 78.3% of GDP.
Public debt to hit 84.6% at end-2022 – IMF
Meanwhile, according to the IMF in its April 2022 Fiscal Monitor report, Ghana’s debt stock will increase to 84.6% of GDP this year.
In the said report, the IMF asserts that the country’s debt-to-GDP ratio will increase from the projected 84.6% in 2022 to 88.4% in 2026, before falling to 87.4% in 2027.
But prior to that it will record relatively same debt-to-GDP ratio of 84% in 2022 and 2023, and later surge to 85% and 86% in 2024 and 2025 respectively.
According to the Fund, the rising debt may constrain government financing and as a result affect capital expenditure, unless government moves fast to shore up revenue.
The government will also have to intensify its expenditure rationalization programme to ensure there is value for money projects.
Regarding the country’s tax revenues, the IMF projected tax revenue to GDP ratio to increase in 2022 to 16.5% from 14.7% in 2021.
This, the Fund says will be a vast improvement compared to the rates registered during the last 10 years.
“In 2023 and 2024, the country’s tax-to-GDP ratio will however fall to 16% and 16.2% respectively,” added the IMF.
