Ghana’s stock of public debt has risen to GH¢304.6 billion at the end of March 2021, up from GH291.6 billion at End- December 2020, according to recent Economic and Financial Data released by the Bank of Ghana. Despite the increase in the debt stock, in percentage wise, the debt has reduced to 70.2% of GDP from 76.1% at End-December 2020.

As such, it is worth acknowledging that the decline in percentage wise is as a result of the economic expansion in the last quarter of 2020. In Q4 2020, the economy expanded by 3.3% which contributed significantly to the overall growth of 0.4% recorded last year.

Meanwhile, Q1 2021 saw the debt stock rising by GH¢5.5 billion, up from GH¢299.1 billion in January 2021. Regardless of the decline in the ratio, Ghana’s debt stock still breaches the sustainability threshold of 70%.

Already, major development partners such as the World Bank and the IMF have cautioned the government to limit its borrowings. The IMF, for instance, has warned that the country’s debt stock may hit 81.5% of GDP by the end of this year. This is according to its April 2021 Fiscal Monitor.

Moreover, there is already public outcry on the country’s rising debt trajectory; a major concern to the citizens. As a result, experts were calling on the government to look for alternative ways of mobilizing funds instead of borrowing. This puts the government in a tight corner since it must deal with the pandemic-induced expenditures; meaning more resources required.

Debt stock in Q1 2021

Furthermore, the data shows that between December 2020 and March 2021, the debt stock rose by GH¢15 billion. This is due to a rise in the debt stock by GH¢7.5 billion between End-December 2020 and End-January 2021.

Moreover, the data shows that as of March 2020, the country’s stock of public debt was GH¢236.7 billion, representing 61.8% of GDP. This means that over the past year, Ghana’s debt went up by GH¢67.9 million, a year-on-year growth of 28.7%.

With regards to the composition of debt, domestic debt component still dominates the country’s debt. At End-March 2021, domestic debt was GH¢163.6 billion, representing 37.7% of GDP. However, as a percentage of the overall debt stock, it accounted for 53.7%. Conversely, external debt component stands at GH¢141.0 billion, representing 32.5% of GDP. But, as a percentage of the overall debt stock, it represents 46.3%.

Deficit improves

Meanwhile, the country’s overall fiscal deficit has improved significantly from 11.7% as of the end of December 2020 to 2.6% as of End-March 2021.

Furthermore, the data points to a gradual improvement in the country’s revenues. Total Revenue & Grants as a percentage of GDP rose from 1.1% in January 2021 to 3.0% in March 2021. Domestic revenue mobilization is the major driver of this sterling performance. In parallel, Total Expenditure has also gone up from 2.1% of GDP in January 2021 to 5.6% in March 2021.

The improvement in revenue mobilization is mainly a result of the drastic measures the Ghana Revenue Authority (GRA) has taken over the past years. This reflected in the GRA exceeding its target in 2020 by GH¢2,569.19 million, representing a positive growth of 6.0%. One of the measures the GRA has put in place is the establishment of the tax court to prosecute tax evaders.

Should the GRA continue to enforce its measures, more positive results may be realized. But for the government’s borrowing to subside, some fiscal restraint may help. Otherwise, government will need to diversify its revenue portfolio.