https://www.myjoyonline.com/ghanas-high-public-debt-is-a-concern-to-investors-fitch-solutions/-------https://www.myjoyonline.com/ghanas-high-public-debt-is-a-concern-to-investors-fitch-solutions/

Ghana's high levels of public debt is likely to remain a concern for investors in the years ahead.

According to Fitch Solutions 4th Quarter 2021 Country Report, a sustained fiscal deficit - albeit a moderately narrowing one - will see the country’s debt stock continue to rise over the coming years. However as a proportion of Gross Domestic Product, it should stabilise this year, and then gradually reduce in the medium to long term.

“We are confident that Ghana will see somewhat narrower fiscal deficits and slower growth in public borrowing in the medium-to-long term. This will bring the debt burden down somewhat as a percentage of GDP relative to the early 2020”.

“While a large debt load in itself is not a direct threat to financial stability, we do not rule out the debt load causing some problems over the long term due to the high interest payments the debt entails”, it further said.

Budget deficit to narrow

Fitch Solutions said the budget deficit will narrow further in 2022, albeit to a still-wide 7.6% of GDP.

“We expect that as economic conditions normalise further in 2022, revenues will continue to recover and rise to 15.9% of GDP. Expenditure growth will moderate – in line with the government’s medium term fiscal consolidation objectives – and consequently we forecast total spending falling as a proportion of GDP to 23.5%”.

Expenditure to remain elevated

It said expenditure will remain elevated in the coming months, and rise from 24.7% of GDP in 2020 to 25.6% (114.6bn) in 2021.

Public sector salaries and benefits will remain the largest non-interest expenditure item, followed by grants to other government units. The government expects the public sector wage to rise by 7.2% to 30.3bn in 2021.

However, Fitch Solutions anticipate that growing political pressure for larger pay increases as evidenced by threats in late July of nationwide strike action by university staff over pay demands, to result in higher-than expected expenditure.

The budget also includes funding for the second phase of the government’s Ghana CARES 'Obaatan Pa' coronavirus support and recovery scheme, which includes funding to develop public healthcare capacity, procure vaccines, and provide support for local communities and businesses.

These measures will come at the expense of general procurement expenditure, and capital expenditure (capex), funding for which will both be trimmed in 2021. Capex is likely to fall from 12.1% of total expenditure to 10.2% in 2021.

DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.


DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.



WhatsApp Icon