- September 27, 2022
- Posted by: Amos Ekow Coffie
- Categories: Banking and Finance, Economics
A Former Deputy Finance Minister, Mona Quartey has said if care is not taken Ghana’s debt to Gross Domestic Product (GDP) will hit 90 per cent by the end of the engagement with the International Monetary Fund (IMF).
She indicated that at the moment Ghana’s debt is hovering around 78 per cent without the Sinohydro, Ghana Cocoa Board (COCOBOD) and the banking sector clean debts.
If these are added by the IMF team, then Ghanaians should expect the debt to cross 80 per cent, running into 90s, she said.
The International Monetary Fund (IMF) is reported to have asked Ghana to add the 2 billion Sinohydro loan from China and the 1.5 billion COCOBOD syndicated loan taken for the 2021/2022 season to its current debt stock.
Speaking in an interview with TV3’s Paa Kwesi Asare on the Business Focus programme on Monday September 26, Ms Quartey described the situation as dire.
“The situation is dire. Clearly, the debt sustainability assessment is going to tell us some more but even without that incremental information we are all aware that we are in debt distressed as a nation.
“Basically, even at the 78 pre cent that we thought we were as at June-July and now, with the news that IMF will like to add the Sinohydro debt and the COCOBOD debt which hasn’t been added hitherto, but will now be added, it will go to 80 per cent, that will take us way above the average debt to GDP ratio for most developing countries, which stands at about 60 per cent on the average. So we will be somewhere in the 80s if we are not careful by the end of this engagement.”
Her former boss at the Finance Ministry Mr Seth Terkper has however projected that the programme the the Akufo-Addo Addo administration is seeking under the IMF is likely to lead to debt reliefs, whether partial or total debt forgiveness.
Mr Terkper further indicated that the programme is also likely to tackle government’s revenue and expenditure given the growing debt situation.
Asked the nature of programme Ghanaians should expect from the ongoing IMF engagement while speaking on the Ghana Tonight show on TV3 with Alfred Ocansey on Monday September 26, Mr Terkper who led the team to engage the Fund during the Mahama administration said “I think this is the 17th programme, I think it will be a mixture of a programme in the context of heavily indebted poor countries [HIPC] when you had a lot of debt reliefs, it could be that.
“It could also be the recent one which the NDC started and the NPP concluded with serious homegrown elements like Sinking Fund, Stabilization Fund and others which we thought should become an element of our fiscal framework. Remember we are talking about debt.
“I keep reminding people that debt is the product of revenue minus expenditure, deficit and borrowing and when you don’t repay then the debt keeps increasing. So this programme will also tackle revenue, it will tackle expenditure”
The Ministry of Finance and the Bank of Ghana have commenced discussions with the IMF for an IMF-supported programme.
A key prerequisite for a programme is confirmation that Ghana’s debt is on a sustainable path.
This will require a comprehensive Debt Sustainability Analysis (DSA), which is currently ongoing.
A statement issued by the Finance Ministry on Monday September 26 said the Government of Ghana is putting together a comprehensive post Covid-19 economic programme which will form the basis for the IMF negotiations.
“The programme seeks to establish a macro-fiscal path that ensures debt sustainability and macroeconomic stability underpinned by key structural reforms and social protection.
“Government negotiations with respect to the IMF-supported programme is commencing this week and we are optimistic about making progress in our discussions.
“Government remains committed, and shall continue to actively engage all stakeholders, both public and private, in a clear and transparent manner as we seek to fast-track this process.”