Ghana's interest payments on debt rise by 8.9%, here's why

As of 30 September 2018, interest payments alone on loans contracted by the Government of Ghana were estimated to have grown to about 31.73%.

Ghana is expected to have paid GHS19.756 billion as interest payments on loans in 2019. Out of this, GHS4.60 billion was spent on the external debt while GHS15.156 billion was used to service loans contracted from the domestic market.

This was paid out of GHS52.9 billion total revenue and grants obtained. Tax revenue was GHS42.3 billion.

According to figures from the Ministry of Finance, interest payments in the first nine months of 2018 was estimated at GHS19.5 billion as against a budget of GHS18.6 billion.

The depreciation of the cedi to the US dollar and increased borrowing by the government were the main reasons behind the increment in interest.

The recent 4.0% appreciation of the cedi to the dollar is, therefore a welcome development since it will reduce the interest payment within the period.

Ghana’s total public debt stock increased by GHS6.3 billion between September and November 2019 to reach GHS214.9 billion in November 2019.

Of the total debt stock, domestic debt was GHS101.4 billion, of which GHS11.2 billion (3.8 per cent of GDP) represented bonds issued to support the financial sector clean-up.

Meanwhile, analysts have expressed concern about the rising interest payments on loans, calling on authorities to intensify its revenue mobilisation and economic growth expansion to generate more funds to support the payments of interest accrued on the debt.