New Era Africa (NERA), an Accra-based Civil Society Organisation, has strongly cautioned the government against excessive borrowing which risks sending the country back to the IMF.
Latest figures show that the total public debt stock was GHC 203 billion, which is about 59% of GDP at the end of June 2019. Of this, external debt makes up 52.8% whilst domestic debt makes up 47.2%. The figures indicate an increment from GHC 122.6 billion since 2016 – a 66 percentage increase over the period.
In their analysis of the 2019 Mid-year budget review, NERA notes that “Ghana risks going back to the IMF if the current rate of debt accumulation is not checked”. The youth-focused think tank is worried that the debt overhang because of which government is spending GHC 18 billion on just interest payments will not help Ghana’s desire to achieve the needed real sector growth and development.
Recently, the World Bank through its Country Director Pierre Frank LaPorte also expressed worry over the current levels of debt accumulation. He said that the country’s current debt level was similar to the level that got it classified as a Highly Indebted Poor Country about two decades ago. He therefore cautioned that the debt levels should be checked.
Other analysts have complained about the government’s penchant for borrowing especially as much of the debt being accumulated is used to settle previous debts. For instance in the 2019 Mid-year budget review, the Finance Minister requested for an amount of GHC 6.37 billion as supplementary estimate. Out of this, a whopping 81% is earmarked to settle debts in the energy sector while 81% of the remaining GHC 1.2 billion will go into interest payments, according to NERA’s analysis. This they say is “a reflection of excessive debt accumulation and the weak performance of the cedi”. What this means is that only a small proportion is left for capital expenditure.
The NERA believes this is unsustainable and puts the country’s long-term development in jeopardy.
You can find their full analysis here;
Click to access 2019%20%20MID%20YEAR%20BUDGET%20REVIEW.pdf
