Ghana’s total debt stock now stands at 67.0 percent of GDP as at the end of June this year. This is captured in the Bank of Ghana Monetary Policy Report on Fiscal Developments for July 2020.
According to BOG, in the corresponding period last year, the total stock of debt was 62.4 percent of GDP. The stock of public debt increased from GH¢218.0 billion in December 2019 to GH¢258.4 billion in June 2020. In percentage terms, the debt stock as at December last year, accounted for 62.4 per cent of GDP.
“The elevated fiscal deficit path has impacted the stock of public debt which rose to 67.0 percent of GDP at the end of June 2020 from 62.4 percent of GDP at the end of December 2019”.
Bank of Ghana further indicated that, domestic debt component of the total debt stock was GH¢122.1 billion (31.7% of GDP) in the first six months of 2020. However, in June 2020, domestic debt accounted for 47.3 percent of the total public debt; slightly lower than the 48.4 percent share in December 2019.
Conversely, external debt was GH¢136.3 billion (35.4% of GDP), indicating a year-to-date increase of some 21 percent. In June 2020, the share of external debt was 52.7 percent which is marginally higher than the 51.6 percent share in December 2019.
BOG explained that the higher share of external debt in June 2020 reflected mainly the Eurobond issuance and the Rapid Credit Facility from the IMF during the period under review.
The increase in the domestic debt, BOG said, was mainly a reflection of a pickup in the medium- to long-term debt, as government attempts to close the financing gap created by the COVID-19 pandemic.
BOG further states that the COVID-19 pandemic and falling crude oil prices have largely influenced fiscal policy implementation in the first half of 2020. Elevated government spending in response to the pandemic exacerbated the effect of the substantial drop in domestic revenue resulting from the pandemic and falling oil prices.
The financing gap created by the combination of the two reinforcing factors have triggered an upward revision of the budget deficit for 2020.
“The expected double-digit deficit together with the expanding primary deficit is exerting pressure on the public debt stock, and alongside lower growth projections for 2020, may pose debt sustainability risks over the medium-term.
“Government expenditure went up by 33.4 percent year-on-year partly due to unbudgeted COVID-19 containment measures. The resulting fiscal deficit of 6.3 percent of GDP was significantly higher than the target of 3.1 percent of GDP. The primary balance also recorded a deficit of 3.3 percent of GDP, above the expected 0.01 percent of GDP. The overall fiscal deficit was financed from both external and domestic sources”, BOG said.
