Government receives strong warning against excessive borrowing

The government has received a strong warning against excessive borrowing amidst concerns that the country risks being classified as high debt distress country if the situation persists.

The red alert which comes from Bretton Wood institutions, the World Bank and International Monetary Fund, is worrying amidst the country successfully raised US$3 billion Eurobond, last week, which was five times oversubscribed.

Many have raised concerns how the borrowed monies are being used mainly for consumption rather than capital projects or investments. The IMF has shared that, Debt Sustainability Analysis is mainly driven by debt service to revenue exceeding the threshold throughout the forecast horizon, though all other indicators also exceed their threshold at some point over the horizon.

“At the moment, Ghana’s debt situation according to World Bank description is a country at moderate rate to high risk of debt distress; of course, yes the country has to be careful”, the Country Director of World Bank, Pierre Frank Laporte worried when speaking to the media after a courtesy call on the Speaker of Parliament.

He believes that, every country will have to borrow it must be cautious of the quantum of borrowing.

“Countries especially developing countries have to borrow because most of us do not have adequate resources, we have to borrow to develop but we have to borrow responsibly.”

“I’m confident the Finance Minister and his team are fully aware of that, we discussed all the time and borrowing as I said is not always a bad thing but you must borrow at the right terms, as best as most favorable as possible and the right amount and the right way.”

The country’s economic progress made over the last couple of years were however applauded.

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.

In 2019, interest payments on loans were expected to be GHS19.756 billion. 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.

Source: Adnan Adams Mohammed