World Bank/IMF joint report maintains that Ghana has accumulated so much debt that it may not be able to repay

Despite the recent debt management strategies and expansion of the economy by the ministry of finance, the World Bank and the International Monetary Fund (IMF) have maintained Ghana as a high-risk of debt distress country.

Finance Minister, Ken Ofori-Atta

This indicates that the country is accumulating so much debt that it may not be able to repay.

This was captured in the latest Debt Sustainability Analysis (DSA) released by the two Washington-based institutions. 

Ghana’s risks of external and overall debt distress continue to be assessed as high per the analysis.

While the rebased nominal GDP significantly improved the public debt to-GDP ratios (albeit remaining elevated), the debt service ratios continue to breach their respective thresholds under the baseline, reflecting underlying vulnerabilities.  

The two institutions maintained that a downward trend in the total public debt-GDP ratio was interrupted in 2018, as a result of the realisation of significant contingent liabilities in the banking sectors. 

Ghanaian Economist, Professor Peter Quartey who spoke after the release noted that the development warrants some drastic actions to contain the situation. 

He maintains that the government must do more to improve revenue mobilization to help move the country to a moderate status. 

He, however, warned the situation could impact negatively on the cost of borrowing going forward.  

Background

Early this year, a report prepared by the Economic Commission for Africa (ECA) named Ghana as the 8th country in Africa facing a high risk of debt distress.

Cameroon, Cape Verde, Central African Republic, Djibouti, Ethiopia, The Gambia, Mauritania, São Tomé and Príncipe, Zambia were the countries among Ghana.

The report warns of rising public debt in Africa which has led to increased government spending on interest payments.

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