The World Bank Group has cautioned Ghana over the possibility of facing acute (severe) fiscal pressures.
According to the Bretton Wood institution, the acute fiscal pressures could be caused by high debt burdens and a sudden rise in sovereign borrowing costs.
The World Bank’s assertion contained in its June 2021 Global Economic Prospects Report, comes on the back of wider budget deficit and a spike in government debt which has heightened the risk of Ghana falling into debt distress.
Ghana’s fiscal deficit according to the 2021 Budget Statement currently stands at 11.7 percent up from 4.7 percent in 2019.
The 11.7 percent fiscal deficit – which government solely attributes to Covid – excludes exceptional costs such as financial sector clean-up costs and energy sector costs.
Included, Ghana’s fiscal deficit is hovering around 15 percent. A fiscal deficit situation the President of the World Bank Group (WBG), David Malpass, has described as problematic for Ghana.
Further asserting that, should Ghana’s fiscal deficit continue on an elevated path, the country would face access problems to market-based finance (capital market) as witnessed in other middle-income countries.
The statement by the World Bank also follows recent high cost borrowings by Ghana on the international capital market for which the country uses close to 100 percent of its tax revenues in servicing.
Ghana in March this year issued a $3 billion Eurobond on the international debt market at an interest rate of 8.8 percent compared to debt instruments issued by developed economies on the international capital market at less than 2 percent.
The Eurobond comprised of four tranches – $525 million 4-Year Zero Coupon, $1 billion 7-year Weighted Average Life (WAL) priced at 7.75%, $1 billion 12-year WAL at 8.625% and $500 million 20-year WAL with a coupon of 8.875%.
In addition to the issued $3 billion Eurobond, Ghana will be issuing another $1 billion Sustainable bond in July this year.
Presently, Ghana’s total debt stock is Ghs 304 billion representing 70.1 percent of Gross Domestic Product (GDP). The country’s debt situation is however, expected to further worsen and exceed 80 percent of GDP by the end of 2021.
On the country’s growth projections for this year and over the next two years, the World Bank noted Ghana will grow at a rate of 1.4 percent this year and 2.4 percent and 3.6 percent in 2022 and 2023 respectively.
On the continent, growth is forecasted to resume to 2.8 percent this year firming to 3.3 percent in 2022 underpinned by stronger external demand, mainly from China and the United States, higher commodity prices, and the containment of COVID-19.
