Debt levels decline to 62% of GDP

The Finance Minister, Ken Ofori-Atta, has disclosed that the country’s debt, as a percentage of GDP, has declined from the 73 percent recorded last year to about 62.7 percent as at end of last month.

The 2017 budget forecasts that total debt to GDP will close the year at 70.9, which makes the latest figure, less than half way into the year, a major decline in the debt levels.

Speaking at the maiden edition of the National Policy Summit, an initiative of the Business and Financial Times, in collaboration with the Ministry of Information, the Finance Minister said: “the Ministry intends to pursue the possibility of using monthly or quarterly GDP so we can compare oranges to oranges.”

Furthermore, he also reiterated government’s commitment to ensure macroeconomic stability through sound and prudent fiscal policy management, guided by the implementation of the Public Financial Management Act (PFMA).

“We believe that if we achieve macroeconomic stability and direct economic policy through allocative efficiency, we will create the necessary environment and opportunities for the private sector to take advantage and work,” he said.

Government has said it determined to continue reprofiling the country’s debt, part of which includes getting more foreign exchange without increasing the debt stock.

The issuance of a total US$2.25 billion dollars in four bonds, recently, forms part of the debt restructuring measures.

The first two bonds, totaling 1.13 billion dollars, were issued for 15 and 7 years’ periods, with the same coupon rate of 19.75%. The other component involved the cedi equivalent of USD1.12 billion in 5 and 10 year bonds via a tap-in arrangement.

Ratings agency Fitch has lauded government’s efforts in getting the economy back on track after a recent ‘crisis’ that forced the ex-government to seek an US$918 million bailout from the International Monetary Fund (IMF).

Fitch forecasts that the economy will grow at about 6 percent this year, from an estimated 3.6 percent in 2016, when it was hampered by lower than expected oil production and power cuts.

“Inflation fell to 12.9 percent year-on-year in March, from a peak of 19 percent in March 2016. The cedi has recovered to 4.2/USD, after depreciating to 4.7/USD in early March. The improvement in the macroeconomic environment has allowed the Bank of Ghana to cut its policy interest rate to 23.5 percent from a peak of 26 percent in 2016.

Further, rising oil production and the benefits from macroeconomic stability will support Ghana's medium-term growth potential above 6 percent, a key rating strength,” the ratings agency said.

Ghana, last year, recorded a budget deficit of an estimated 8.9 percent of GDP (on a cash basis) in the run-up to the December general elections, compared with a government and IMF target of 5.3 percent, and an outturn of 6.3 percent in 2015.

The cash deficit includes up to US$1.3 billion (3% of GDP) in off-budget and unapproved spending. On a commitment basis, accounting for an additional US$650 million in unpaid commitments, Ghana's deficit widened to as much as 10.5 percent of GDP.