As Ghana’s debt stock continues to rise, reaching about 75 percent of GDP in the first eleven months of 2020, an economist with Databank, Courage Martey has charged managers of the economy to prioritize reducing the cost of debt going forward.
What is noteworthy according to the 2020 mid-year budget statement is the fact that interest payment for last year which was pegged at GHS26.3 billion makes up about 55% of the about GHS54 billion earmarked to be collected as total revenue and grants.
A further look at the figures reveals that whereas the domestic component of debt from January to November makes up about 38 percent of the country’s GDP, interest payment on domestic debt alone for the year 2020 took up about 80 percent of total interest payments.
On the other hand, the external debt component which was about 36 percent of GDP, took up only about 20 percent of total interest payment. This shows that domestic interest rates are higher when compared with external interest rates.
Speaking to Citi Business News on the strategies to deal with Ghana’s debt situation, economist, Courage Martey said fiscal consolidation will be non-negotiable going forward.
“Once the debt stock remains high in the short to medium term the debt management now needs to focus aggressively on reducing the cost of debt. Because the cost of debt is also an important factor in driving up the debt stock. So you need to ensure that new debt that are incurred are coming in at a lower cost and that will create the platform for us to restructure the debt portfolio and take off expensive debt and reduce the risk of debt distress. And also reduce refinancing risks.”