Ghana’s economic indices is not looking good with a recent report from the International Monetary Fund ( IMF) warning that the country is closer to being classified as a high debt distressed country. With this development, the Fund has expressed concerns about Ghana’s ability to honour its international obligations as public debt stock as at September 2019 was pegged at GH¢208.6 billion, being equivalent to 60.3 per cent of the country’s gross domestic product (GDP), data from the Bank of Ghana revealed.

The country’s 2020 budget sets aside over $3 billion (GH¢19bn) to pay interests alone and is one of the biggest items on the government’s expenditure bill which is more than the capital expenditure, a pointer that many other items on the budget will give way for interest payments.

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The IMF staff report comes after a recent assessment of Ghana’s economy. The report also pointed at Ghana’s rising energy sector debts as the government last July called the energy sector debt situation a “state of emergency.” This was during the mid-year budget review during which the Finance Minister Ken Ofori-Atta castigated the previous NDC government for entering into “obnoxious take-or-pay contracts signed by the NDC, which obligate us to pay for capacity we do not need.”

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The government pays over GH¢2.5 billion annually for some 2,300MW in installed capacity which the country does not consume. The Minister sounded alarmed that “from 2020 if nothing is done, we will be facing annual excess gas capacity charges of between $550 and $850 million every year.

The latest assessment raises concerns about the purpose of government borrowings, whether it goes into consumption or into projects capable of generating revenue to pay back the loan. The move could increase the country’s risk profile and ability to borrow on the international market. The IMF staff report could impact Ghana’s plans to issue another Eurobond in 2020.

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Ghana’s Finance Minister Ken Ofori-Atta wants to return to the Eurobond market to raise $3bn to pay for expenditure items the country cannot fund from domestic sources. The government wants to spend GH¢86m in 2020 but is projecting to raise only GH¢67bn. It leaves a deficit of GH¢19bn, monies that the Eurobond could make available. The planned return to the Eurobond market is the seventh time in the past eight years.

Ghana is already among 10 low-income countries (LICs) in Africa that were at high risk of debt distress. The country in April 2019, successfully completion an Extended Credit Facility (ECF) programme, or bailout, of the International Monetary fund (IMF). It was Ghana’s 16th bail-out programme with the IMF since 1960

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry