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Since independence in 1957 to date, the Akufo-Addo government alone has added GHS180 billon to Ghana’s total public debt during President Nana Akufo-Addo’s first term, former Deputy Minister of Finance Dr Cassiel Ato Forson has said.

In a 43-page abridged presentation of more than a 100-page document, Dr Ato Forson said “within a space of four years, in dollars terms, the current NPP administration increased Ghana’s public debt by 50 per cent”.

“In Akufo-Addo’s first term, he has increased Ghana’s public debt, in USD terms, by 50 per cent”, he told an audience at a forum on the economy ahead of the Finance Minister’s Mid-Year Budget Review.

“In fact, if we are to look at it from the cedi perspective, then it means that President Akufo-Addo’s government added 60 per cent of Ghana’s public debt as of 31 December 2020”, stressing that of the “public debt that we had from Kwame Nkrumah to date, President Akufo-Addo’s government alone added 60 per cent”.

According to the Ranking Member of the Finance Committee of parliament, within that same period, the Akufo-Addo government added 20 per cent to the country’s worsening debt-to-GDP ratio, which currently stands at 76.6 per cent.

Ghana’s current public debt stock has risen to GHS332.4.

The debt, which was GHS304.6 billion as of the end of the first quarter in 2021, shot up by GHS30 billion in April and May, according to data released by the Bank of Ghana.

This translates into a debt-to-Gross Domestic Product (GDP) ratio of 76.6%.

It is marginally higher than the debt-to-GDP ratio of 76.1% recorded at the end of 2020.

The external debt rose from GH¢ 141 billion as of the end of March 2021 to GHS 161.5 billion – an increase of GHS 20 billion as of the end of May 2021.

The external debt component made up 37.2% of the total value of the economy, which is projected to be about GHS 434 billion for 2021.

The domestic debt component rose to GHS170.8 billion from the GHS163.6 billion figure of March 2021 – GHS 7 billion rise.

It represents 39.4% of the projected GDP for 2021.

It encapsulates the financial sector resolution bond of GHS15.2 billion as of May 2021.

The International Monetary Fund (IMF) recently said “an economic recovery is underway” in Ghana, adding: “Growth is expected to rebound to 4.7 per cent in 2021 supported by a strong cocoa season and mining and services activity and inflation remaining within the Bank of Ghana target”.

The current account deficit is projected to improve to 2.2 per cent of GDP, supported by a pick-up in oil prices, and gross international reserves are expected to remain stable.

The 2021 budget, the IMF said, “envisages a fiscal deficit of 13.9 per cent of GDP in 2021, including energy and financial sector costs, and a gradual medium-term fiscal adjustment which would support a decline in public debt starting in 2024”.

However, the IMF warned, “this outlook is subject to significant uncertainty, including from new pandemic waves and risks associated with large financing needs and increasing public debt”.

Read the IMF’s full statement below:

IMF Executive Board Concludes 2021 Article IV Consultation with Ghana

FOR IMMEDIATE RELEASE

Washington, DC – July 20, 2021: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Ghana on July 19, 2021.

Ghana was hit hard by the COVID-19 pandemic. The government response helped contain the pandemic and support the economy, but at the cost of a record fiscal deficit. The economic outlook is improving, even though risks remain, including from the evolution of the pandemic and rising debt vulnerabilities.

The pandemic had a severe impact on economic activity. Growth slowed to 0.4 per cent in 2020 from 6.5 per cent in 2019, food prices spiked, and poverty increased.

The fiscal deficit including energy and financial sector costs worsened to 15.2 per cent of GDP, with a further 2.1 per cent of GDP in additional spending financed through the accumulation of domestic arrears.

Public debt rose to 79 per cent of GDP.

The current account deficit widened slightly to 3.1 per cent of GDP as the decline in oil exports was partially offset by higher gold prices, resilient remittances, and weaker imports.

The Ghanaian cedi remained stable against the US dollar, partly due to central bank intervention, and gross international reserves remained at 3.2 months of imports.

External and domestic financing conditions tightened considerably at the start of the pandemic, but have improved since, and Ghana successfully returned to international capital markets for a US$3 billion Eurobond issuance in March 2021.

An economic recovery is underway. Growth is expected to rebound to 4.7 per cent in 2021, supported by a strong cocoa season and mining and services activity, and inflation remaining within the Bank of Ghana target.

The current account deficit is projected to improve to 2.2 per cent of GDP, supported by a pickup in oil prices, and gross international reserves are expected to remain stable.

The 2021 budget envisages a fiscal deficit of 13.9 per cent of GDP in 2021, including energy and financial sector costs, and a gradual medium-term fiscal adjustment which would support a decline in public debt starting in 2024.

However, this outlook is subject to significant uncertainty, including from new pandemic waves and risks associated with large financing needs and increasing public debt.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They noted that the pandemic had a severe impact on Ghana’s economy, with slower growth, higher food prices, and increased poverty.

Directors commended the Ghanaian authorities for their proactive response to the COVID-19 pandemic, which mitigated its economic impact, but contributed to a record fiscal deficit and increased public debt vulnerabilities.

While there are encouraging signs of an economic recovery, they noted that it remains uneven across sectors. In this context, Directors stressed the importance of entrenching prudent macroeconomic policies, ensuring debt sustainability, and pressing ahead with structural reforms to deliver a sustainable, inclusive, and green economic recovery.

While noting that risks to Ghana’s capacity to repay have increased, Directors concurred that they are still manageable and that Ghana’s capacity to repay the Fund remains adequate.

Directors welcomed the fiscal adjustment envisaged in the 2021 budget. They stressed that fiscal consolidation is needed to address debt sustainability and rollover risks, as Ghana continues to be classified at high risk of debt distress. To protect the most vulnerable, considerations could be given to more progressive revenue measures and a faster return to the pre-pandemic level of spending, with a shift towards social, health, and development spending. Directors also encouraged the timely completion of the planned audit of COVID 19 emergency spending and new expenditure arrears.

Directors agreed that the monetary policy stance remains broadly appropriate while noting that tighter policy would be needed if inflationary pressures materialise. Although gross international reserves are relatively high, Directors stressed the need to guard against erosion of external buffers and remain committed to a flexible exchange rate regime. Directors also encouraged the authorities to limit monetary financing of the deficit.

Directors noted that the financial sector cleanup had made the sector more resilient but stressed that banks’ growing holdings of sovereign debt create risks and crowds out private sector credit.

In this regard, they took positive note of ongoing supervisory and regulatory reforms, which are important steps to protect financial stability. Directors also welcomed the improvements in the AML/CFT framework that allowed Ghana to exit the FATF “grey list”.

Directors emphasised that the authorities’ structural transformation and digitalisation agendas are critical to support the recovery.

They noted that the structural transformation can be complemented by the ongoing energy sector review, diversification in tourism, and the digital transition, which has the potential to reduce corruption, boost tax revenues, and improve service delivery. Directors supported continued capacity development efforts in these areas.

It is expected that the next Article IV consultation with Ghana will be held on the standard 12-month cycle.