Ghana’s Debt-to-GDP highest among peers

The persistent rise in Ghana’s debt to Gross Domestic Product (GDP) has caught the attention of many including experts who also beginning to compare Ghana’s situation with its peers in Africa.

Senior Lecturer in Public Accounting at the Ghana Institute of Public Administration, Dr. Raziel Obeng-Okon finds the result of the comparison worrying as Ghana is the highest.

According to him “by the end of 2015, the Debt to GDP ratios were: 52.80 per cent for Kenya; 32.16 per cent for Cameroon; and 50.10 per cent for South Africa.”

Dr. Obeng-Okon told this paper that “using 2014 figures, the Debt to GDP ratios were 36.41 per cent for Cote D’Ivoire; 47.50 per cent for Tunisia; 37.65 per cent for Sierra Leone; 33.20 per cent for Liberia; 10.5 percent for Nigeria and 6.10 per cent for Libya.”

“Is Ghana therefore joining the league of developed countries or is it becoming an outlier amongst its peers within the sub-region? Is Ghana’s debt levels really sustainable?” the GIMPA lecturer queried.

Even though Dr. Obeng-Okon admitted that countries such as Japan, Greece, Italy, Portugal, Singapore, the USA and Belgium had the highest debt to GDP ratios in 2015, “their interest rates regimes are very low.”

“Considering all of the countries mentioned, the USA has the highest short-term government interest rate of 0.25 per cent. Singapore’s rate is 0.17 per cent, the four European nations are at 0.05 per cent, and Japan is at 0.00 per cent; due to the low interest rates on these debts, it does not really pose the kind of fiscal challenges that Ghana has to contend with,” he submitted.

The GIMPA lecturer lamented the unduly high interest Ghana pays on its loans, adding that “our interest payment is so high that it does not create fiscal enough space for comfort and this is one reason why the government continues to grapple with the payment of arrears.”

Unlike Ghana, most of the developed economies with high Debt to GDP ratio have very stable currencies and therefore are able to hold the values of their debt stable. This means that the sustainability of Ghana’s debt to GDP depends also on the ability of the Government through the Bank of Ghana to hold the value of the cedi such that it does not create artificial increments without any corresponding increments in productivity.

The GIMPA lecturer noted that the sustainability of Ghana’s Debt to GDP ratios also depends on its government’s Net Debt to GDP ratio which “is a better measure because it comprises all financial liabilities minus all financial assets corresponding to the debt instruments.”