IMF: Ghana Public Debt ‘Exceeds Pre-HIPC Levels’
The country’s public debt now exceeds pre-HIPC levels, according to the International Monetary Fund (IMF) report after a review of Ghana’s performance under the bailout deal.
The IMF is projecting that Ghana’s debt levels – which has hit about 90 billion Ghana cedis as at June this year – could increase further in the coming months.
According to a GNA report, Ghana’s debt at the time of joining the Highly Indebted Poor Country (HIPC) initiative in April 2001 was 6,025.6 million dollars (about 24 million Ghana cedis currently). Debt-to-GDP ratio then was about 110 percent.
The Washington-based lender is forecasting that Ghana’s debt could cross the dreaded 70 percent of GDP mark by the end of this year. The IMF projects a 75 percent debt-to-GDP ratio for the country by the end of 2015.
Many economists believe a debt-to-GDP ratio exceeding 70 percent spells doom for an economy.
The IMF says Ghana’s economic growth prospects will depend on how fast the ongoing power crisis will be addressed.
“Economic growth prospects will depend on how fast the ongoing electricity crisis is addressed. A new decline in commodity prices would weigh on the fiscal and external balances”, the IMF said.
According to the Washington-based lender, fall in the prices of gold, cocoa and crude oil on the world market could put the country’s fiscal gains made over the last few months into jeopardy.
The situation, according to IMF, could reduce Ghana reserves and weaken the cedi against major trading currencies even further.
On the central bank, the IMF said the Bank of Ghana should be ready to tighten policy more aggressively if inflationary pressures do not recede.
It gave a thumbs up to a recent decision by the Bank of Ghana to introduce new liquidity management instruments to improve monetary policy transmission and support more effective implementation of the inflation targeting framework.
The IMF says authorities must pursue reforms aimed at deepening the foreign exchange market, which, combined with soothing interventions of BoG backed by increased external reserves, should help reduce the volatility of the exchange rate over time.
Meanwhile, government has always maintained it is working hard to contain the rising public debts.
The Finance Minister Seth Terkper told Joy Business government is currently working towards borrowing cheaper funds to finance expensive debts.
Mr Terkper has also argued that recent loans contracted by government are being spent on self-financing projects – that is the projects will pay for the loans.
The IMF in June this year said Ghana has fallen into the league of high-risk debt distress countries.
IMF’s Communication Director, Gerry Rice, told Joy Business’ George Wiafe that Ghana must be cautious with borrowing through the Eurobonds issue in order not to escalate its indebtedness.
“For countries at high-risk distress like Ghana, reducing the debt burden and associated vulnerability is a priority so the authorities have to be very selective with regards to new non-concessional borrowing since that can escalate,” Rice had explained.