Ghana’s debt stock hits GH¢205.5 billion

Ghana’s debt stock hits GH¢205.5 billion
Source: Ghana | JoyBusiness | JAD
Date: 19-09-2019 Time: 09:09:48:pm

The country’s total debt stock has hit GH¢205 billion ending July this year. 

This was contained in the September Bank of Ghana’s summary of financial and economic data. 

This was released after the Monetary Policy Committee met this week to review the health of the economy and to take a decision that is likely to influence the cost of credit in the country.

Breakdown of the debt numbers   

The GH¢205 billion total debt stock puts the country’s Debt-to-GDP Ratio at 59.4 percent. GH¢107 billion of the debt was accrued from loans taken from outside the country, working out to about 20.4 billion dollars. 

This works out to about 31 percent of the total value of the economy. 

On the other hand, domestic debts work out to about GH¢98.3 billion representing 28 percent of the total value of the economy, expressed in percentage terms. GH¢10 billion of the debt was also advanced towards the cleaning up of the financial sector, which the Bank of Ghana classifies as “Financial Sector Resolution Bond”

Rate of increase since last year August   

The new debt numbers mean that from July 2018 to July 2019 the total debt stock has gone up GH¢45.8 billion. In just two months the debt stock has gone up by about GH¢5 billion Ghana.  

Reasons for the debt stock increase?

The increase in the debt stock over the last two months can be attributed to the cedi’s marginal depreciation and recent funds advanced towards the clean up of the banking and non-banking sectors of the economy. 

According to the Bank of Ghana, it has spent about GH¢10.7 billion in cleaning up the financial sector. 

Based on estimates outlined in the 2019 Supplementary Budget, the cost could reach 21 billion by the end of this year. 

This was after the finance minister Ken Ofori Atta projected in the budget that the clean-up could reach $3 to $4 billion end of 2019. 

This new figure is about GH¢3 billion more than what JoyBusiness projected last month.


The country’s debt position since 2018

The country’s total debt has witnessed some significant increase over the last two years. 

The total public debt stock on a nominal basis increased from GH¢142.6 billion as at end of December 2017 to GH¢173.1 billion as at end of December 2018.

How much does every Ghanaian owe?

Based on the GH¢205.5 billion debt, every Ghanaian should owe about GH¢6,850 if the debt is shared among the population size of 30 million. 

Some analysts have even argued that Ghanaians could be paying for this cost in the form of taxes.      

Impact of rising debt stock on the economy

For some, the impact would be on Ghana’s debt servicing bill. According to the 2019 Budget government is planning to set aside GH¢18.6 billion just to pay for the interest of funds borrowed. 

Again if the economy does not expand to accommodate these rising debt, it could impact negatively on the country Debt-to-GDP Ratio, which currently stands at almost 60 %.

Some analysts have also warned that if these funds are not being invested in sectors that would pay back for itself in the future, then the country could be sitting on a time bomb.

Some economists have also argued that since Ghana has not defaulted on its debts commitment in recent times, then investors may not react negatively to these debt numbers.

The current administration on the other has also argued that in discussing these numbers would look at the how they have been able to grow the economy to absorb this debt by looking at the Debt to GDP ratio.

Earnings from exports

From the data, Ghana's earnings from the sector was picking up strongly. Total earnings for the country ending August this year stood at $10.6 billion, up from the $10.1 billion recorded in July in 2018. 

Gold brought $4.1 billion, cocoa was $1.5 billion while earnings from crude oil exports was a little over $3 billion. The data showed that earnings from all various traditional commodities witnessed some increase as well.

On imports, the country spent a little over $8 billion to finance what it needs. 

Non-oil imports accounted for $6 billion while $1.6 billion went into financing the country’s oil imports. 

This resulted in a trade balance of $2.6 billion. Ghana’s Gross International Reserves ending August this year was $8.2 billion, representing 4.1 months of import cover. While the Net Reserve Position was a little over $5 billion.

The Bank of Ghana puts the cedis' rate of depreciation for the first 8 months of this year at 9.22 per cent. 

This is higher than the 7.57 per cent recorded for the same period in 2018.       

Banking Sector developments

Developments in the sector according to the Data sought to confirm recent position by the Bank of Ghana that confidence in the banking sector is picking up.  

This is despite the fact that the results were mixed. This is because even though the nominal figures were going up, the rate of the growth in cases was not that significant. 

Total assets in the banking sector stood at GH¢11 5 billion compared to the GH¢104billion in the same period last year.  

However, the rate of growth was 10.5 per cent, compared to 21.5 per cent in the same period last year. 

Total deposits ending August this year, stood at GH¢76 billion, compared to GH¢67.7 billion in August 2018. However, the rate of growth for 2019 was just 12.2 per cent compared to 26.2 per cent in 2018.