Ghana likely to default on debts, says Seth Terkper

Erstwhile Minister for Finance, Seth Terkper, has noted that Ghana is likely to default on the servicing of its debts given its swelling debts and stagnant revenues.

Ghana’s debt stock as a percentage of Gross Domestic Product (GDP) according to the International Monetary Fund (IMF) is expected to increase in the medium term.

According to the IMF, the country’s debt stock is expected to increase to 81.5 percent this year, 83.2 percent in 2022, and further to 84.8 percent, 86.0 percent and 86.6 percent in 2023, 2024 and 2025 respectively.

Ghana’s total public debt stock as at end-December 2020, reached Ghs 291.6 billion representing 76.1 percent of GDP.

According to data made available by the Central Bank, external debt alone stood at Ghs 141.8 billion, approximately $24.7 billion which is equivalent to 37 percent of GDP.

Domestic debt on the other hand is slightly higher at Ghs 149.8 billion at the end of 2020, about 39.1 percent of GDP.

The anticipated increase in the country’s debt levels does not however, correspond to similar increments in mobilized revenues over the medium term – Ghana’s total revenues is projected by Mr Terkper to stagnate around 16 percent of GDP in the medium term.

At the moment, Ghana uses close to 100 percent of its total revenues for interest payments and compensation – wages and allowances of workers – borrowing to finance other critical expenditure.

Making the assertion at the maiden PFM Dialogue Series, the former Minister for Finance, noted that the likelihood of Ghana defaulting on its debts is affirmed by the country’s status of being at risk of high-debt-distress as well as calls by the IMF for Ghana and other SSA countries to seek debt service suspension from the G-20’s DSSI. 

“Hints of debt default are emerging from credible sources,” added Mr Terkper.

The maiden edition of the PFM Dialogue Series was held in partnership with the Natural Resource Governance Institute (NRGI) with acknowledgments to the African Development Bank (AfDB) and Africa Centre for Energy Policy (ACEP).