Ghana has 'fallen into debt trap' – IFS

Ghana’s rising debt stock is distressing the economy, the Institute of Fiscal Studies (IFS) has warned.

“The country has fallen into a debt trap as real interest rate continues to surpass GDP growth which has forced the country to continue committing more of its tax revenues to service debt,” said Executive Director of IFS, Prof Newman Kusi at a roundtable meeting in Accra on Tuesday, 13 March.

The Debt-to-GDP ratio fell to 68.6 per cent at the end of September 2017 from 73 per cent of December 2016. As of September 2017, the total debt stock was GHS138.9billion with the annual average rate of debt accumulation falling to 13.58 per cent from 36.0 per cent in the 13 months.

According to Prof Kusi, who was speaking on the theme: “Ghana’s growing Public Debt – Implications for the Economy”, the “seriously worsening” debt situation portends ill consequences for the economy.

“…By end 2016 the Debt-to-GDP ratio has risen to 73.3 per cent and moving towards the ratios recorded during the pre-HIPC period. As a result, total public debt service to revenue has not only assumed a rapidly increasing path but has breached its indicative long term threshold,” Prof said.

With the current situation, he said 41 pesewas of each cedi raised by government is used to pay interest on debt.