Alex Mould challenges IMF over Ghana’s debt servicing ratio

International Monetary Fund (IMF) claim that Ghana's debt servicing ratio to revenue for 2019 was around 30 percent. According to the financial expert, the figure quoted by the IMF rep was not accurate. “It should rather be approximately 60 per cent,” the former banker noted. He calculated that based on Ministry of Finance’s data on Ghana's 2019 Fiscals released in February 2020. Ghana's interest payment was around GH¢20 billion with debt amortisation (foreign debt alone) being about GH¢11 billion, he indicated. “So adding interest and principal amortization (however, only for foreign debt) total debt service for 2019 was around GH¢31 billion. And, according to the Ghana Revenue Authority, domestic revenue collected for 2019 was GH¢52 billion,” Mr Mould, who is also the immediate past Chief Executive of Ghana National Petroleum Corporation (GNPC) clarified. “So in the ratio form; debt servicing to domestic revenue is 31:52 (in GH¢). This, in percentage wise, total debt servicing to domestic revenue will be approximately 60%. “Even if he was referring to only interest payment in the debt service number, which ordinarily include debt principle amortization, the interest-only-debt-service to domestic revenue is approximately 40% for 2019,” he stressed in a statement. Meanwhile, the IMF rep, Dr. Albert Touna-Mama, speaking at the recent Graphic Business/Stanbic Bank Breakfast meeting, described the 30 per cent debt servicing to revenue as twice as much compared to countries of similar features. He further revealed that government total debt position as at December 31, 2019 was GH¢215 billion, describing it as worrying the borrowing rate of Ghana. “When we think about debt and borrowing, I want to talk about the fact that we don’t only measure it with respect to GDP. An important metric that we look at and in the case of Ghana is a metric that is of concern, that is, debt service to revenue.” “We use debt service to revenue as a proxy of how sustainable the debt of Ghana is. At the moment, that ratio is close 30 percent. When we take that for countries of similar features, it should be below 18 percent. This is twice as much as what it should be. So, of course, we are concerned about the borrowing of Ghana,” he explained. The World Bank has cautioned Ghana against heaping its external debt, stating that the country is currently rated as a moderate to high-risk debt distressed country. It further warned that Ghana must tread cautiously in order not to cross acceptable thresholds of debt sustainability. Consequently, the Finance Minister, Ken Ofori-Atta, announced in the 2019 budget that government is projecting to achieve GH¢67.1 billion in total revenue, representing 16.9 per cent of GDP, in the 2020 fiscal year. He noted that the country is expected to use GH¢21.7 billion which translates to about 5.4 per cent of GDP to service interest on its debt. Of this amount, he further said domestic interest payments will constitute about 76.3 percent and amount to GH¢16.6 billion.

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