The country’s total debt stock has hit GH¢214.9 billion ending November 2019.
This was contained in the January 2020 Bank of Ghana’s summary of financial and economic data released Friday.
This was released after the Monetary Policy Committee met earlier this week to review the health of the economy and set a new policy rate for the market, which currently stands at 16 per cent. The rate often influences the cost of credit in the country.
The GH¢214.9 billion total debt represents 62.1 per cent of Ghana’s-Debt-to-GDP ratio ending November 2019.
The $20.3 billion (GH¢111.9 billion) of the debt were borrowings done by the government in dollars and from outside the country (that is the external debt component). This represents 32.4 per cent of the country’s GDP.
On the other hand, GH¢109.2 billion of the debt, was borrowed locally, translating into 29.8 per cent of Ghana’s GDP (Domestic Debt Component).
The financial sector cleanup cost made up about GH¢10.7 billion of the domestic debt stock for the country. This was as a result of bonds that the Government has issued to cover the cost of the financial sector clean-up.
Year-on-Year increases in the total debt stock
The Bank of Ghana report shows that from November 2018 to November 2019, the total debt stock went up by GH¢42 billion to reach GH¢214.9 billion.
The last time the Bank of Ghana released its Economic and Financial data which was in September 2019, the debt stock was about GH¢208.5 billion. This should mean that in two months, the total debt stock has gone up to $6.4 billion.
Possible reasons for the debt stock increase?
The increase in the debt stock over the last two months can be attributed to the cedi’s marginal depreciation and recent funds advanced towards the cleanup of the banking and non-banking sectors of the economy.
JoyBusiness is also learning that bonds that was re-issued to take care of some of the government debt obligations have also accounted for a marginal increase in the total debt stock for last year.
So how much does every Ghanaian owe?
Every Ghanaian in the country could be owing about GH¢7, 163. That’s if the GH¢214.9 billion debt is shared among a population size of about 30 million.
Now this “loosely” means that if the funds that have been borrowed were not invested in projects that can pay for it, then every Ghanaian may be paying about GH¢7, 163, spread over the period to pay this debt.
IMF and Ghana’s Total Debt Stock
The IMF in its recent staff report warned that the country could in medium-term be classified as debt distress country if measures are not taken to manage the debt situation. The Fund expressed concern about
Ghana’s high risk of debt distress, and highlighted the need to strengthen the fiscal rules and phase out off-budget operations. Also, most Directors urged the authorities to avoid new collateralized borrowing to help reduce public debt and improve fiscal transparency.
Directors emphasized that a more ambitious fiscal stance, based on a comprehensive domestic revenue
mobilization strategy, would help anchor debt dynamics on a declining path, contain financing needs, create buffers for contingent liabilities, and support a stronger external position.
Impact of rising debt stock on the economy
For some, the impact would be on Ghana’s debt servicing bill. According to the 2019 Budget government is planning to set aside GH¢18.6 billion just to pay for the interest of funds borrowed.
In the 2020 Budget, the Finance Minister Ken Ofori is projecting that interest payment would hit GH¢21.7 billion. Again if the economy does not expand to accommodate these rising debt, it could impact negatively on the country’s Debt-to-GDP Ratio, which currently stands at almost 60 %.
Some analysts have also warned that if these funds are not being invested in sectors that would pay back for itself in the future, then the country could be sitting on a time bomb.
Some economists have also argued that since Ghana has not defaulted on its debts commitment in recent times, then investors may not react negatively to these debt numbers.
The current administration on the other has also argued that in discussing these numbers would look at the how they have been able to grow the economy to absorb this debt by looking at the Debt to GDP ratio.
Ghana’s Export Earnings
Total exports ending December last year was about $15.6 billion. These were total earnings secured from the exports of Gold, Crude Oil and Cocoa.
The $15.6 billion, is about $700 million more than the total earnings secured in 2018. Earnings from gold brought in about $6.2 billion for 2019 compared to $5.4 billion for gold exports for 2018.
Cocoa exports ending December 2019 stood at $2.2 billion compared to the $2.1 billion secured in December 2018. Oil Exports was $4.4 billion ending December 2019 as against $4.5 billion gotten as at the end of December 2018.
Expenditure on Imports
On the other hand, the country spent about $13.3 billion to finance its import for 2019. This is slightly higher than the $13.1 billion the country spent in 2018. Oil imports ending December 2019 accounted for $2.3 billion compared to $2.5 billion for the same period in 2018. Non-Oil Imports did cost the country about $10.9 billion ending December 2019, as against $10.5 billion it spent in December 2018.
Balance of Trade numbers
Based on these exports developments, Ghana recorded a trade balance of $2.2 billion while overall Balance of Payment was $1.3 billion.
External Sector Developments
Ghana also ended 2019 with the International Reserves of $8.4 billion. In December 2018, the end of year International Reserves stood at GH¢7 billion. This should mean that the Bank of Ghana was able to increase its reserves by $1.4 billion over the 12 months period. Net International Reserves, stood at $5.1 billion ending December 2019.
Banking Sector Developments
Banks in the country ended 2019 with the total assets valued at 129.1 billion dollars. Total Deposits with all the banks in the country stood at 83 billion cedis up from 63 billion cedis recorded as at the end of December 2018. This represents an annual growth of 22.2 per cent. Total Advances, on the other hand, stood at GH¢52.3 billion, representing a 22.1 per cent jump from last year. However non-performing loans stood at 13.9 per cent, representing a decline from 18.9 per cent in December 2018.
Cedis’ performance on the interbank market for 2019
The Bank of Ghana report also shows that the Ghana cedi for the first month of this year had appreciated marginally against the dollar, British Pound and the Euro. Against the Dollar, the cedi is up by 0.3 per cent. It was 1.9 per cent against the British Pound and the Euro was 2.3 per cent.
JoyBusiness is also learning that rate of appreciation as at the end of January has even gone up further.
Credit : Myjoyonline