The World Bank has urged Ghana and other African countries with high risk of debt distress to invest more efficiently to service their debts.
According to the Bank, even though Ghana’s economic prospects are bright, “debt is an area of concern.”
Ghana’s public debt reached GH¢142.5 billion as at December 2017, representing 69.8 percent of GDP.
In September 2017, Ghana’s debt stood at GH¢138.9 billion representing 68.1 percent; the figure dropped to GH¢137.6 billion in October representing 67.4 percent. But in November 2017, it went up to GH¢139 billion representing 68.1 percent.
Responding to questions after presenting the ‘Africa’s Pulse,’ report which is an analysis of issues that shape Africa’s future, the World Bank Chief Economist for the Africa region, Albert Zeufack cautioned that “higher debt burdens and the increasing exposure to market risks raise concerns about debt sustainability.”
The report noted that Sub-Saharan African countries had tapped international markets at an increasing pace.
“The first lower Middle Income Country in the region to issue an international bond was Ghana, which issued a 10-year dollar denominated international bond in 2007,” the report recalled.
Debt sustainability risks soar
Debt sustainability risks in the region increased significantly over the past few years, with 18 countries at high risk of debt distress at the end of the first quarter of 2018 compared with eight in 2013.
The report further disclosed that the number of Sub-Saharan African countries in debt distress doubled from four in 2013 to eight in 2018.
According to the World Bank, the main drivers of the recent increase in debt were rising fiscal deficits and the depreciation of exchange rates, especially in commodity exporting countries.
Pursue reform agenda to sustain growth
“African governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth,” the Bank advised.
The report disclosed some resurgence in economic growth for the continent, on the back of expectations that oil and metal prices will remain stable, but noted that governments will have to implement reforms to address macro-economic imbalances and boost investment.
Diversification of exports critical for higher growth
The Bank warned that for many African countries, economic recovery remained vulnerable to fluctuations in commodity prices and production, underscoring the need for countries to “build resilience by pushing diversification strategies to the top of the policy agenda.”
Stressing the point that growth was still dependent on commodities and that commodity prices were volatile, Economist Zeufack called for reforms that will allow the private sector to invest in value addition in the area of exports.
He noted that Ghana and Cote d'Ivoire had taken the lead in diversifying their export commodities, “adding value to cocoa and exporting cocoa butter and chocolates instead of just exporting the raw cocoa beans.”
Investing in skills and education
It is critical to invest in skills and education of the population to ensure that people are equipped with the tools not only to be more productive but also to seize new opportunities in non-traditional exports.
The Bank advised increased access to education as well as quality of education, both secondary and tertiary.