Interest payments to cost GHS22bn in 2020, economist says it’s depriving CAPEX

Interest payments on loans will cost the nation GHS22 billion this year.

The country is targeting GHS67.07 billion as total revenue and grants for this year.

Out of this, a substantial chunk will go into wages and emoluments, as well as cost of servicing debt.

But economist Professor Godfred Bokpin says interest payments are already crowding out priority spending, thus, depriving capital spending to bridge the infrastructure gap.

“When you look at the 2020 Budget, the government is setting aside approximately GHS22 billion just for interest payment. Do you know what that could do for us as a country?” he questioned.

Speaking on Accra-based Joy FM in response to Vice-President Dr Mahamudu Bawumia’s claim that the economic figures are pointing in the right direction, Professor Bokpin said there is some little fiscal space that can aid government to borrow extra to finance infrastructure projects since the nation is not yet in the high debt-distressed country category.

“If government wants to borrow it can … We are not in a debt-distress category, we are at a high risk of it, so, it means that we still need to be a bit cautious; if the borrowing is going to the productive sectors of the economy and enhancing the cashflow generation capacity of the economy, then there is no problem”, said Professor Bokpin

Continuing he said: “When you look at the 2020 budget, the government is setting aside approximately GHS22 billion just for interest payments; you know what that could do for us as a country; at the end of the day, it goes for just debt servicing, and, in fact, when you look at the depreciation of the cedi, the last six years or so, it can be traced to the debt management strategy we started implementing toward 2016.”

Interest payments on Ghana’s debt increased by 8.97% to 40.71% at the end of the third quarter of 2019.

In September 30, 2018, interest payments alone on loans contracted by the government of Ghana were estimated to have grown to about 31.73%.

Ghana is expected to have paid GHS19.756 billion as interest payments on loans in 2019. Out of this, GHS4.60 billion was spent on the external debt whilst GHS15.156 billion was used to service loans contracted from the domestic market.