The International Monetary Fund (IMF) has forecast Ghana’s external debt to increase to 34.5 percent of the country’s GDP in 2020, above the 28.1 percent forecast for the whole of the Sub-Saharan African region.
This is according to the Sub-Saharan Regional Economic Outlook released by the IMF.
The current projections for Ghana is also higher than the sub-regional median value of 31.5 percent.
The recent forecast represents a 4.2 percentage point increase in the country’s external debt component relative to 30.3 percent recorded in 2019.
The Fund however expects the country’s external debt to decline marginally to 32.0 percent in 2021 in its recent forecast.
According the data provided by the IMF, Ghana’s external debt averaged 21.8 percent between 2010 and 2016. It however increased to 29.1 percent in 2017 and rose further to 30.6 percent in 2018.
Current trends in external debt
Recent macroeconomic and financial data released by the central bank of Ghana on September 25, 2020, shows that Ghana’s current stock of external debt accounts for 35.8 percent of GDP as compared to 30.9 percent in July 2019.
This means that the IMF expects the country’s external debt to decline by at least 1.3 percentage points if its projections are to be met.
The current data shows that Ghana’s external debt has increased by GHS30.2 billion between July 2019 and July 2020.
The total external stock of public debt has increased from GHS 107.8 billion in July 2019 to GHS138.0 billion at end of July this year. This resulted in a year-on-year growth of 28 percent as at the end of July 2020.
The Bank of Ghana (BOG) attributed the rise in the debt stock to low revenue and increasing expenditures over and above the target in the first seven months of the year.
0n a month-on-month basis, eternal debt increased by GHS1.3 billion, from GHS136.7billion in June 2020 to GHS138.0 billion as at July the same year. This represents a 0.95 percentage point increment over the previous month.
Figure 1 External and Domestic Debts as percentage of GDP
Source: Bank of Ghana
Moreover, current data from the central bank of Ghana shows that the domestic debt component of the total debt stock has also increased from GH¢122.1 billion (31.7% of GDP) in June to GHS125.1billion (32.5% of GDP) at the end of July.
This means that domestic debt has increased by GHS3 billion between June and July 2020. A monthly growth of 2.46 percent.
The effect of this development has been an increase in the total stock of public debt from GHS 258.8 billion in June 2020 to GHS263.1 billion at end of July the same year. This puts the country’s debt stock at 68.3 percent of GDP having increased from 67.2 percent in June.
The year-on-year analyses shows an increment of 28 percent over the past one year. This is because in July 2019, the total stock of public debt was GH206.1 billion as compared to the current figure which stands at GHS263.1 billion in July 2020.
The total stock of public debt has, for the past seven months of the year, been on the rise. In January, the stock of public debt stood at GHS219.6 billion representing 57.0 percent of GDP.
This however, increased steadily to end the first quarter at 61.4 percent, with a nominal value of GHS236.7billion. As at the end of the second quarter in June 2020, public debt galloped to GHS 258.8 billion which accounted for 67.2 percent of the county’s GDP.
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