Ghana’s growing public debt to Gross Domestic Ratio remains worrying despite the gains made at the macroeconomic front, the Agence Française de Développement (AFD) has said.
The AFD in its June Macroeconomics and Development report titled ‘Ghana: What Economic Challenges’ said high levels of debt and public deficits persist in spite of the country’s consolidation programme.
“The risk of over indebtedness for Ghana still remained high and servicing of the debt continues to represent around 42 per cent of government revenues,” it said.
Ghana’s public debt stock, according to the Bank of Ghana, as at May this year stood at GH₵200 billion, representing 58.1 per cent of GDP.
The report said the weight of public debt recently increased in the context of a greater need for external financing and growing wage bill which rose to about 14.4 billion in 2017 and absorbed about 50 per cent of government revenues.
Ghana’s external debt stock which stood at GH₵105.4 billion at the end of May account for 30.6 per cent of Gross Domestic.
“Ghana’s high public debt not only impedes economic activity but also puts its financial stability in danger,” the report said.
It said the growing public debt and especially external debt component could put the country in debt stress and pose a threat to the country’s economic stability.
The report entreated the government to put strategies in place to improve domestic revenue generation to finance government’s development projects as well as measures to reduce the country’s public debt.
It lauded the President, Nana Akufo-Addo, for the policies he is pursuing to reduce the debt burden on the country, stressing the President “made debt reduction one of the major themes of his economic programme.”
The report stressed the need for the government to diversify the economy and reduce the country’s dependence on raw materials.
“Since the 1990s, Ghana’s main economic vulnerability relates to the limited diversification of its production base. As such, the early 200s saw an economic slowdown caused by the drop in international cocoa and gold prices as well as the rise in oil prices,” it said.
Gold, cocoa and oil combined constitute more than 90 per cent of the value of the country’s export base, the report said, adding that “the country’s high dependence on these commodities, often subject to the volatility of international commodity prices, creates uncertainty in the outlook for the growth, inflation and export receipts.”
By Kingsley Asare
