Ken Ofori-Atta

Finance Minister, Ken Ofori-Atta, has pointed out that government will implement strategies including capping concessional and non-concessional borrowing to achieve a sustainable nominal debt-to-GDP. This according to him, would be key to reducing Ghana’s debt levels and ensuring timely servicing of debt.

He also indicated that the medium-term fiscal framework will, therefore, be anchored on fiscal adjustment and structural reforms to ensure long-term debt sustainability.

Ghana’s rising debt slowdown to ¢393.4 billion, about 78% of Gross Domestic Product.

Speaking recently in Parliament whilst presenting the 2022 Mid-Year Budget Review, the Finance Minister said if Ghana’s debt is to be brought to sustainable levels, an aggressive fiscal consolidation plan will need to be accelerated to ensure the return of the primary balance to surplus territory in the medium to long-term.

According to him, government conducted a Debt Sustainability Analysis (DSA) in June 2022 to evaluate the solvency and liquidity status of the country’s total public debt portfolio, while considering current and future debt service obligations.

He stressed that “the outlook for Ghana’s debt sustainability is challenged by emerging risks and vulnerabilities. Global exogenous shocks including weak recovery from Covid-19 pandemic, investor sentiments, exchange rate depreciation, high inflation, negative primary balances, and the crystallisation of contingent liabilities from both the energy and financial sectors will pose significant solvency and liquidity risks in the medium to long-term.”

Update on Ghana’s Credit Ratings for 2022

The Finance Minister admitted that global sovereign credit ratings have been quite turbulent.

Fiscal and balance of payments accounts for most Emerging Market economies were expected to taper down but there is a lingering need for fiscal stimulus whiles other external volatilities persist.

Mr. Ofori-Atta said notwithstanding these developments, there was optimism at the beginning of 2022 that these risks would be abated and for the fiscal and balance of payments accounts to return to the pre-Covid-19 period performance levels.

However, Russia’s invasion of Ukraine heightened volatility and further manifested itself in elevated inflation and inflation expectations, widening fiscal deficits, and worsening current account deficits for import-reliant economies.