Ghana’s debt service as a ratio of tax revenues to rise by 20% – IMF

The International Monetary Fund (IMF) has said Ghana’s debt service relative to tax revenues is expected to continue on an elevated path increasing by 20 percent in the medium-term.

According to the Bretton Wood institution in its April 2021 Fiscal Monitor Report, despite the country’s debt stabilizing over the medium term, its debt service payments as a ratio of total tax revenues will continue to be on the rise.

Other African countries to experience similar increments in their debt service payments as a ratio to tax revenues include Kenya, Nigeria, and Zambia.

“Average debt is projected to stabilize over the medium term, with elevated debt service relative to tax revenues in many countries (exceeding 20 percent in Ghana, Kenya, Nigeria, and Zambia) and debt distress risks in several others,” stated the report.

Speaking as a panelist in the 4th edition of Media General’s Economic Dialogue series on the theme: Ghana’s Recovery Path in 2021 – Balancing Fiscal Consolidation With Growth Policies, Senior Technical Advisor at the Finance Ministry, Dr Samuel Nii Noi Ashong, noted 35 percent of Ghana’s total revenues and grants are earmarked for debt service payments.

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 IMF further notes that despite an anticipated peak in debt levels in 2021, Ghana and some countries will continue to experience increments in their total debt stock levels.

In the case of Ghana, 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.