Ghana’s debt hit ¢335.9bn in July 2021; still in debt distress category

Ghana’s debt jumped by ¢3.5 billion to hit ¢335.9 billion at the end of July 2021, the Bank of Ghana’s latest Summary of Economic and Financial Data has revealed. This is equivalent to 76.4% of Gross Domestic Product and keeps the nation in the highly debt distress category.

The World Bank and the International Monetary Fund had warned the nation to slow down its rate of borrowing because of the risk of default if the economy is hit by external or domestic shocks. For instance, the World Bank Country Director, Pierre Larporte, said if the prices of traditional commodities such as crude oil, gold and cocoa are hit by shocks, Ghana will be in a difficult position to service its debt, whilst the IMF expressed worry in its Article IV Consultation about the high exposure of banks to government securities that is Treasury bills and bonds, saying it is increasing the balance sheet risks of the banks.

But from the figures released by the Central Bank, the rate of borrowing has only slowed down slightly. According to the data, the domestic debt went up to ¢173.9 billion in July 2021, from ¢170.8 billion in May 2021. This is equivalent to 39.5% of GDP. Importantly, the financial sector resolution bond had reduced to ¢14.9 billion in July 2021, from ¢15.2 billion in May 2021. This is equivalent to 3.4% of GDP.

The external debt stood at $28 billion in July 2021. This is approximately 37.0% of GDP.
The external debt stood at $28.0 billion in April 2021, but went up to $28.1 billion in May 2021 and stayed at $28.1 billion in June 2021.

Early in the year, the IMF said in its 2021 Fiscal Monitor that Ghana’s public debt stock was not going to take a nose dive anytime soon as it is expected to hit 81.5% of Gross Domestic Product (GDP) by the end of this year.

Per the IMF data on low-income developing countries, Ghana’s debt to GDP ratio will surge to 83.2% in 2022, and then further to 84.8%, 86.0% and 86.6% in 2023, 2024 and 2025 respectively. It will however drop slightly to 85.5% in 2026.

In Sub Saharan Africa, Zambia and Congo Republic are the only two countries that are predicted to record unsustainable debt levels worse than Ghana.