The International Monetary Fund (IMF) expects Ghana’s current account deficit to decline marginally by 0.4% this year, according to its latest World Economic Outlook. Meanwhile, the Fund expects West Africa’s second largest economy to run an overall current account deficit of 2.8% in 2021. This will be lower than last year’s current account deficit of 3.2%. This also means that the country’s export of goods and services will be lower than its imports in 2021.
Meanwhile, data from the Bank of Ghana show that the country ended 2020 with a deficit of 3.2% of GDP as of December 2020. Moreover, the IMF expects the country’s deficit to rise to 4.9% in 2022. The Fitch Solution, however, expects the country to run a deficit of 3.8% in 2021.
Thus, the country has continuously run a surplus in its trade balance. As of February 2020, the country’s trade balance stood at US$339.7 million, accounting for 0.5% of GDP. A critical examination of the data from the Bank of Ghana show that Ghana’s current account deficit stems from her inability to export more services than it imports.
Debt stock projections
With regards to the country’s debt situation, the IMF expects the stock of public debt to continue to rise over the medium term. In its April forecast, the IMF expects Ghana’s debt to hit 81.5% of Gross Domestic Product (GDP) by the end of this year. Ominously, the Fund forecast the country’s debt to GDP ratio to rise to 83.2% in 2022. As if that is not enough, the international money lender further projects debt to rise to 84.8%, 86.0% and 86.6% in 2023, 2024 and 2025 respectively. In the next five years, the IMF expects Ghana’s debt to account for 85.5% of the country’s to total output.
With this projections, Ghana will have the highest debt to GDP ratio in the West African Sub-region. Meanwhile, per the Fund’s recent forecast, Ghana’s debt is almost double that of the whole of Sub-Saharan Africa. The IMF forecast 47.2% debt to GDP for Sub-Saharan Africa in 2021. Meanwhile, Ghana ranks third as the country with the highest debt to GDP ratio per the IMF’s estimations. The only two countries with debt to GDP ratio above that of Ghana in Sub-Saharan Africa are Zambia and Congo Republic.
However, compared to other rating agencies, the IMF’s projections for Ghana are on the high side. Earlier, an International ratings agency, Fitch indicated that Ghana’s debt will peak in the region of 75% of GDP from 2024. However, Fitch also expects the country’s debt to continue on its current trajectory in the medium term. This is due to high COVID-19 pandemic-related spending and the realisation of energy sector liabilities.
Current debt stock
Nevertheless, data from the Bank of Ghana show that the country’s debt currently stands at GH¢291.6 billion as of December 2020. This accounted for approximately 76.1% of the country’s GDP. External debt standing at GH¢141.8 billion, is equivalent to 37.0% of GDP. Moreover, the data from the Central Bank show that domestic agents hold the majority of the debt stock. As such, the domestic debt which stood at GH¢149.8 billion at the end of 2020, accounted for 39.1% of GDP.
Data from the Finance Ministry show that the Banking sector holds majority of the country’s domestic debt. The Bank of Ghana is the single entity holding the highest portion of the country’s debt in the banking sector.