Ghana slowly moves to HIPC

Ghana is likely to soon cross the dreaded 70 percent mark of debt-to-GDP ratio that could push it into the Highly-Indebted-Poor-Country (HIPC) category, economic analysts have indicated.

The country’s public debt recorded GH¢88 billion as at March this year, representing 67.3 percent of the total value of the economy, equivalent to GH¢112 billion.

Government’s penchant for borrowing has become alarming to the extent that the IMF will have to approve the issue of a 10-year Eurobond slated for this month.

The $1 billion Eurobond, according to Seth Terkper, Finance Minister, would be used to settle government debts that will mature in 2017.

Two domestic bonds have already been issued by government this year. These were undersubscribed, raising concerns over whether government should still go ahead to issue the Eurobond.

The IMF hinted that the country is gradually gravitating towards the league of countries that might find it difficult to pay their debts on time. There were reports in April this year that Ghana was about to be classified as a high-risk debt distress country as a result of its high debt portfolio.

Gerry Rice, IMF’s Communication Director, recently commenting on Ghana Government’s resolve to float the $1 billion Eurobonds, said “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.

“So fund policies are flexible, they can accommodate some non-concessional borrowing if indeed it is intended to finance critical and profitable projects for which concession finances are not available,” he added.

If government continues borrowing money at the rate it is currently doing, the development could result raise its cost of borrowing largely.

But Mr Terkper argued that the recent loans are being spent on self-financing projects which are expected to pay for the loans.