Ghana’s public debt level reached GH¢65.7 billion at the end of August this year as government continues to borrow to finance its spending to stimulate growth.
The country’s central bank figures show that government borrowed GH¢13.8 billion more from both domestic and foreign lenders within the first eight months of the year.
According to the Bank of Ghana, Ghana’s debt level now equals 57.3 per cent of the Ghanaian economy and represents GH¢2,479 for every man, woman, and child living in the country.
Ghana, which has an estimated 26.5 million population, has seen its government continue to spend more than the revenues it collects while digging deeper into debt.
The Governor of the Bank of Ghana, Dr. Henry Kofi Wampah explained at the end of the central bank’s 62nd Monetary Policy Committee meeting in Accra that the domestic debt component as at end-August 2014 was GH¢28.5 billion (43.3% of total), while the external debt stock was US$11.9 billion (56.7% of total).
So far, the interests that the government has paid on loans totaled GH¢15.8 billion since February, which is more than the spending that the government has made this year on educational and health care as well as road infrastructure combined.
Why should Ghanaians care?
B&FT understands that these interest payments leave fewer resources available for important priorities such as subsidies for agric inputs like fertilizer as well as spending on public programs such as health care, education, and social services.
A senior official of the Bank of Ghana, who asked not to be named because he’s not authorize to talk to the media further explained: “The effects of government debt are wide-ranging. For example, when government borrows, it competes with the private sector, limiting the ability of businesses to borrow and invest in plants, machinery, equipment, and research, as well as training and development of staff.
“Moreover, the higher the government debt, the greater the burden on taxpayers who are saddled with government debt servicing costs otherwise referred to as interest payments. Interest payments eat up money that could be used for vital services such as healthcare, education, infrastructure investment, among others.”
Meanwhile, the central bank’s preliminary fiscal data for January to September 2014 indicate that government’s revenue has fallen short of target due to decline in imports and commodity prices on the world market.
Dr. Henry Kofi Wampah explained: “Total revenue and grants realised was GH¢17.7 billion (15.4% of GDP) falling short of the target of GH¢18.4 billion (16% of GDP). The shortfall in government receipts was partly due to lower import volumes, decline in commodity prices particularly gold in the world market, and the slowdown in economic activity arising from energy challenges.”
