- July 1, 2021
- Posted by: Ato
- Category: Economics
American credit rating agency, Fitch Ratings, has projected Ghana’s interest payments on debts to increase to 53 percent of total revenue this year.
Interest payments Fitch however notes, will fall by 3 percentage points reaching 50 percent of total revenue in 2022.
The projected interest payments for 2021 when compared to 2019’s interest payments of 37 percent of total revenue represents a 16 percentage points increment in debt servicing over a two-year period.
According to the international credit rating agency, the projected increment in interest payments is mainly on the account of increased domestic debt issuance.
“General Government debt now constitutes 535% of government revenue, compared with the 2020 ‘B’ median of 304%. Furthermore, an increase in domestic debt issuance has raised the government’s interest spending. Fitch forecasts interest expenditure will rise to 53% of revenue in 2021 before falling below 50% in 2022, compared with a 2022 ‘B’ median of 13.2%,” noted Fitch in its rating action of Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR).
Government, for the first quarter of this year, spent approximately Ghs 15.6 billion as interest payments on debts taken and compensation of public sector workers.
According to data contained in the Bank of Ghana’s (BoG) Quarterly Statistical Bulletin, some Ghs 8.2 billion was spent on interest payments with the remaining Ghs 7.3 billion spent on compensation of public sector employees.
The Ghs 15.6 billion spent on interest payments and compensation as noted by the Central Bank, exceeded total revenue generated within the first quarter of this year by some 24.4 percentage points.
Total revenue generated within the economy for Q1 2021 was Ghs 12.5 billion – implying that government borrowed in excess of Ghs 3 billion to cover the two basic obligatory expenditures.
Despite the projected increase in interest payments, Fitch asserts that government will still be able to meet its interest payment obligations for this year.
“In spite of the increase in government debt, Ghana has good access to fiscal and external financing. The government issued USD3 billion in Eurobonds in March 2021 and has budget approval to issue an additional USD1 billion, which will be enough to cover the USD3.3 billion in external debt principal and interest payments that we estimate for 2021. Domestic debt markets remain liquid and domestic debt yields remained broadly stable over 2020, even as the government increased its domestic issuance,” Fitch posited.
Source: norvanreports.com
