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Investors likely to express concern over Ghana's rising public debt – Fitch report

Fri, 22 Oct 2021 Source: www.ghanaweb.com

Ghana’s fast-rising public stock is likely to be of major concern for an investor in the coming years ahead, Fitch Solutions has projected.

According to the international research agency’s 4th Quarter 2021 Country Report, said “a sustained fiscal deficit – albeit a moderately narrowing one – will see the country’s debt stock continue to rise over the coming years”

“We are confident that Ghana will see somewhat narrower fiscal deficits and slower growth in public borrowing in the medium-to-long term. This will bring the debt burden down somewhat as a percentage of GDP relative to early 2020.”

In addition, the Fitch Solutions report said though Ghana’s public debt stock may be of concern to some investors, a proportion of the country’s Gross Domestic Product is expected to stabilise in 2021, which will then gradually reduce in the medium to long term.

“While a large debt load in itself is not a direct threat to financial stability, we do not rule out the debt load causing some problems over the long term due to the high-interest payments the debt entails”, the report said.

Meanwhile, there are other concerns that Ghana’s increasing interest costs of international bonds on the capital market will take a huge toll on the government’s finances and liquidity in the economy.

An Economist and Fixed Income Strategist, Neville Mandimika has indicated Ghana is likely to return to the International Monetary Fund (IMF) for financial assistance should the increasing public debt stock persist.

“At this point, Ghana needs to present a credible plan B on how they fund the budget in the absence of Eurobond issuance adding, do they still have access to the Eurobond market at these levels? Could they issue one at a reasonable price? The answer seems to be no.”

“In a worst-case scenario where debt is growing amid a global risk-off mood, Ghana may have to head back to the IMF,” the economist is quoted in a Bloomberg Survey.

Ghana’s current public debt stock stands at around GH¢336 billion ending July 2021. A figure that could hamper economic growth and recovery efforts.

Source: www.ghanaweb.com
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