The Ministry of Information has stated that per the the Monetary Policy Committee of the Bank of Ghana, Ghana’s Debt-to-GDP ratio has dropped to 57.2%.
The ministry cites the 2016 Annual Progress report, which it says put Ghana’s Total Debt to GDP ratio at 73.1% at the end of December 2016 with year on year debt accumulation rate of 36% in the erstwhile administration.
According to some information put out by the ministry, the situation resulted in an increasing interest burden, with interest payments alone consuming 45% of tax revenue and 6.8% of GDP in 2016.
It further stated the Akufo-Addo government upon assuming office realized the negative consequences high rate debt accumulation has on the economy which includes narrowing the fiscal space for the government to operate.
The ministry explains with high debt to GDP ratio, the country is forced to use more resources to service old debts instead of investing in the economy.
It further explained there was the need to implement prudent fiscal measures to reduce the debt stock of the economy because of the inherited debt strangling the economy.
One measure the ministry says was adopted by the government was to accelerate the rate economic growth whilst slowing the rate of debt accumulation.
Referring to the 2017 budget which was presented to Parliament by the Finance Minister, Ken Ofori-Atta, the Information Ministry noted specific measures implemented include reduction in fiscal deficit and debt re-profiling (involves borrowing at less expensive rates to replace more expensive debt at longer tenor).
“As a result, the debt to GDP ratio declined from 73.1% at the end of December 2016 to 68.6% at the end of September 2017. The interest burden declined from 45% of tax revenue to 43.9% in September 2017. (2018 Budget Figures)”
“In this 2018 fiscal year, the Government again didn’t renege on its promise of debt sustainability. The approved 2017-19 Medium Term Debt Sustainability Strategy was strictly implemented. The strategy supported fiscal consolidation and tight monetary policy that minimizes cost and addresses portfolio risk. Vibrant domestic capital market that support domestic financing of budget was government’s priority”, parts of the statement reads.
The ministry maintained the recent recognition of increased economic activity has contributed to a further reduction from 68.6% to 57.2%.
It explains, excluding the costs of bailing out distressed banks, the debt to GDP was 53.9 % of the rebased GDP, meaning, the debt Sustainability Strategy implemented is expectantly yielding the required results and has drastically reduced the rate of debt accumulation from 36% to 19.8%.
According to the ministry “this gives hope that with persistent fiscal discipline as practiced by the administration, debt to gdps ratio will further decrease and therefore freeing up more fiscal space for the government to undertake developmental projects.”