Ghana’s rising fiscal deficit problematic – World Bank President

President of the World Bank Group (WBG), David Malpass, has described as problematic Ghana’s fast rising fiscal deficit.

According to him, should Ghana’s fiscal deficit continue on an elevated path, the country would face access problems to market-based finance (capital market) as witnessed in other middle-income countries.

“Many of them (middle-income countries) face access problems to market-based finance, and they also have rising fiscal deficits that are problematic,” said Mr Malpass in a response to a question on what the World Bank is doing to help developing and middle-income countries address liquidity problems and provide debt relief.

Ghana’s fiscal deficit as contained in the 2021 Budget Statement currently stands at 11.7 percent up from 4.7 percent in 2019.

The 11.7 percent fiscal deficit – which government solely attributes to Covid – excludes exceptional costs such as financial sector clean-up costs and energy sector costs. Included, Ghana’s fiscal deficit is hovering around 15 percent.

Speaking further, Mr Malpass also mentioned that middle-income countries like Ghana, with increasing debts are going to face debt challenges on the back of collateralized debts.

Adding such debts are extremely hard to restructure for debt relief purposes.

“I want to mention also the challenge facing middle-income countries of collateralized debt. It makes it very hard to restructure [debts],” he stated.

Ghana, with respect to the Sinohydro deal, has a $2 billion collateralized debt agreement in which China is to provide massive infrastructural development across the length and breadth of the country and in return, will be given a percentage of Ghana’s bauxite reserves.

Ghana currently faces a huge debt burden as its debts has reached unsustainable levels. The nation which is currently in high-risk of debt-distress, has its debts reaching 74.1 percent of Gross Domestic Product (GDP).

Ghana’s debt situation is expected to further worsen and exceed 80 percent of GDP by the end of 2021.