Ghana’s debt service-to-tax ratio to remain above pre-COVID-19 pandemic level – IMF

Ghana’s debt-service-to-tax ratio is expected to remain above the pre-pandemic level and exceed 40%, the International Monetary Fund April 2022 Fiscal Monitor Report has revealed.

According to the report, about 60% of low-income developing countries including Ghana are now at high risk or already in debt distress – compared with slightly less than 30% in 2015 – and continue to rely on international support to end the pandemic and ensure growth.

The country is expected to spend ¢37 billion tax revenue in 2022 to service its debt, according to data from the Finance Ministry.

The Fund said “the average fiscal deficit in low-income developing countries remained broadly stable in 2021 at about 5% of GDP. Fiscal deficits of commodity exporters remained broadly unchanged as higher revenues driven by the rebound in commodity prices were offset by increases in spending”.

“Deficits widened further in countries that rely on tourism (Cambodia) and those that face fiscal pressures from social spending. On average, government revenues remained well below prepandemic projections as the decline in revenue mobilization—1½ percentage points of GDP lower revenue-to-GDP ratio—was compounded by a severe output loss (about 6 percentage points of GDP)”, it further added..

Continuing the Fund said “fiscal deficits and debts are evolving with large differences across country groups, reflecting divergent economic recoveries. After a large increase at the onset of the pandemic, deficits declined in 2021 as economies recovered and countries started to withdraw exceptional support. Deficits are expected to decline further in advanced economies, mirroring the pace of the recovery”, the Fund said.

“In emerging markets and low-income developing countries, on average, deficits are projected to decline more gradually over the medium term. Scarring from the pandemic, more expensive food and energy imports, risks of social unrest, and tighter financing constraints in the developing world will make meeting the United Nations Sustainable Development Goals even more challenging”, it explained.

Global public debt is expected to stabilise at around 94% of Gross Domestic Product during the 2022–2024, well above pre-pandemic levels, raising concerns about debt vulnerabilities and financial stability and weighing on growth prospects, especially if interest rates rise faster than expected.

The IMF further warned that the fiscal outlook is subject to unusually high uncertainty.

This is due a protracted and intensified war in Ukraine, beyond a worsening humanitarian crisis that would disrupt commodity markets for longer, further pressuring inflation and undermining economic growth and exacerbating fiscal deficits.