Public debt costs 57.4 percent of economy’s GDP – Minister

Mr Ken Ofori-Atta, the Minister of Finance has said that the public debt including the financial sector bailout costs at the end of September 2018, was 57.4 per cent of rebased Gross Domestic Product (GDP).

He said, excluding bailout costs, the debt was 53.9 per cent of rebased GDP; and that, the monetary policy rate dropped from 20 per cent at the end of 2017 to 17 per cent at the end of October 2018.

He said this on Thursday while delivering the budget statement and Economic Policy of the Government for the 2019 financial year at the Parliament House in Accra.

Speaking on the Domestic Macroeconomic Performance for 2018, Mr Ofori-Atta said the provisional trade balance for the period recorded a surplus of US$1,617.81 million compared to a surplus of US$777.82 million recorded for the same period in 2017.

He explained that Gross International Reserves accumulated to US$6,756.43 million, sufficient to cover up to 3.6 months of imports, ahead of the 2018 target of 3.5 months.

He said the 2018 Budget envisaged a 6.8 per cent GDP growth rate, however, with the rebasing of the GDP, there had been the need to revise the 2018 growth projection.

He emphasised that the overall GDP growth target had been revised to 5.6 per cent, taking account of the base effect of the GDP rebasing and half-year performance.

The Minister said the exchange rate, which appreciated against the US Dollar up to May 2018, depreciated by 7.57 per cent at the end of September 2018, largely on account of external pressures including the strengthening of the US Dollar, the US-China trade war, and the US Fed policy rate hikes.

Speaking on monetary aggregates and credit developments, Mr Ofori-Atta said broad money supply, including foreign currency deposits (M2+) grew by 24.1 per cent year-on-year at the end of September 2018 compared to 23.1 per cent over the same period in 2017.



He noted that the pace of expansion in banks' total outstanding credit increased in the 12-month period to September 2018 and total outstanding credit increased by 13.0 per cent constituting GH¢0.7 billion compared with 7.9 per cent constituting GH¢2.6 billion in September 2017.

“Most of the credit to the private sector was absorbed by the commerce and finance, services, transport and storage, communication, and manufacturing sub- sectors”, he said.

Mr Ofori-Atta said money market interest rates generally trended downwards in 2018, reflecting the reduction in the monetary policy rate and general improvements in macroeconomic fundamentals.

However, he noted that the 91-day Treasury bill rate increased to 13.37 per cent in September 2018, from 12.8 per cent a year ago, while the one-year note firmed up to 18 per cent in September 2018, adding that, deposits and lending rates of the Deposit Money Banks also went down generally.

The Minister said the Cedi was under pressure in the second quarter of 2018, following the strengthening of the US dollar in international markets and these developments resulted in tighter financing conditions and capital flow reversals in a number of emerging markets and frontier economies, including Ghana.

He said domestic demand pressures for foreign exchange, as well as, speculative trading were also contributory factors, however, the Cedi stabilised in the third quarter, benefiting from positive sentiments on the market as a result of the cocoa syndicated loan inflow.

Mr Ofori-Atta said these external sector developments resulted in a drawdown of the country's gross international reserves by US$798.41 million to US$6.8 billion at the end of September 2018.