Ghana’s debt to GDP ratio could hit the 70 percent threshold if the base rate for calculating the figure, is adjusted to reflect current growth targets.
This is the indication from economist, Dr. Eric Osei Assibey.
Crossing the 70 percent mark is also likely to affect Ghana’s international credit rating.
“The projection was about 4.9 percent based on the revised budget. If that is what was used to obtain the 65.9 percent and now the IMF has revised the country’s growth target to 3.3 percent thereby reducing the base. Calculating the debt levels with the relatively lower growth rate will result in a higher figure,” he warned.
A former Deputy Governor of the Bank of Ghana, Dr. Bawumia has challenged government’s debt to GDP figure of 65 percent.
But Finance Minister, Seth Terkper has defended the figure explaining that it demonstrates government’s commitment to reduce the country’s fiscal deficit.
However Dr. Osei Assibey explains to Citi Business News a revision of Ghana’s growth target coupled with government’s new 5th Eurobond and the 10 million dollars local bond, will cause the country’s debt to cross the 70 percent mark to GDP.
“We have also just borrowed some 750 million dollars from the fifth Eurobond issued last month which has not been factored yet. So adding this figure together with the 10 million dollars local bond, then we are talking of a figure over seventy percent of GDP,” he stated.
Figures released by the central bank indicate that the country’s total debt stock has almost trippled from about 9.3 million dollars in 2009 to 27.8 million dollars at the end of July this year.
Meanwhile, the domestic component has also increased from 4.29 million dollars to 12.5 million dollars between the six year period.
The external component has also increased from 5 million dollars in 2009 to 15.3 million dollars at the end of July this year.
The debt to GDP ratio for the period has reached 65.9 percent from the 36.9 percent recorded in 2009.
International Credit Ratings Agency, Moody’s, has revised the outlook on Ghana’s Long Term Bond Ratings from Negative to Stable.
The rating agency has also affirmed the rating at B31.
Moody’s cited significant fiscal deficit reduction and success in implementing structural reforms over the past year as well as reduced government liquidity risk on the external side following the issuance of the US$750m Eurobond, the proceeds of which are earmarked for debt repayments as some of the key drivers for the stabilization of the rating.