Public debt hits GH¢218 billion in 2019

Ghana’s public debt increased from 173.1 billion Cedis in 2018 to 218 billion in 2019, according to the latest figures released by the Bank of Ghana.

This represents an increase of 25.9 per cent.

Based on this, the country’s debt augmented from 173.1 billion Cedis in 2018 to a sum of 218 billion Cedis in 2019_ adding a sum of 44.9 billion Cedis to the debt stock.

In terms of debt to Gross Domestic Product (GDP), the amount represents 63 per cent of the country's GDP.

The breakdown of the debt stock

Breaking down the debt stock, it shows that the domestic component pegs as 105 billion Cedis representing 30.5 per cent, while the external component hit 20.3 billion dollars representing 32.5 per cent.

Meanwhile, in 2019, the government announced several measures put in place to contain the country’s debt level to prevent it from reaching unsustainable levels.

In the Banking sector, data showed that the level of banks with Non-Performing Loans, (credit-gone-bad) reduced from 18.4 per cent in January 2019 to 13.6 per cent in January 2020.

Also, the Total Assets of banks later saw significant growth from 106 billion Cedis in January 2019 to a total sum of 128.5 billion in January 2020 representing a 21.3 per cent growth compared with 13.6 per cent in January 2020.

Reasons for the increase in debt stock

The increase in the country’s debt stock can be attributed to the cedi’s marginal depreciation and recent funds advanced towards the cleanup of the banking and non-banking sectors of the economy.

The data shows that the domestic debt component, from July 2019 to September 2019, went up from GH¢98 billion to GH¢101.4 billion.

Based on estimates outlined in the 2019 Supplementary Budget, the total cost of the financial sector cleanup could reach GH¢21billion as of the end of 2019.

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

Additionally, the Finance Minister Ken Ofori Atta in the 2020 Budget presentation said the total estimated cost for the government’s fiscal intervention, excluding interest payments from 2017 to 2019 was estimated at GH¢16.4 billion_ an amount overly above what was initially presented.

How much is each Ghanaian owing?

On an average, based on the country’s GH¢218 billion debt, every Ghanaian should owe about GH¢ 7,266 should the debt be shared among a population size of 30 million.

Impact of the rising debt stock on Ghana’s economy

According to the 2019 Budget government was planning to set aside GH¢18.6 billion just to pay for the interest of funds borrowed_ a move which will put Ghana’s economy of rocky grounds.

In the 2020 Budget, the Finance Minister Ken Ofori-Atta projected that interest payments are likely to hit GH¢21.7 billion.

To build on more facts, some analysts have 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.

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

However, some economists have also said that since Ghana has so far not dodged in its debt’s commitment in recent times, then investors may not react negatively to these debt numbers.