The Bank of Ghana (BoG) recently put the country’s debt-to-GDP ratio at 66.4 percent as at May this year but the Ministry of Finance quoted a figure of 63 yesterday in Parliament.
According to Seth Terkper, Minister of Finance, who read the mid-year review of the 2016 Budget to Parliament yesterday in Accra, government, by the inconsistent figures, had put the debt climb on a reverse course.
“We are proud to note that for the first time since the declaration of HIPC in 2001 we were able to first, slow down the rate of growth of debt accumulation between 2014 and 2015; and second, now reverse course, with the debt-to-GDP ratio falling from 72 percent of GDP at end-2015 to 63 percent at end-May 2016.”
Chastising critics who had indicated that the mounting debt-to-GDP ratio was likely to send the country back to the highly indebted poor country (HIPC) status, he said: “Certainly, this is not the trajectory that will take the nation back to HIPC, as some had predicted only recently. We will persevere in bringing down the level of our public debt.”
The nation’s public debt level rose rapidly from a very low 26 percent in 2006—with the steepest post-HIPC increase of 31 percent in 2007—to approximately 72.1 percent by end-2015.
“We note that HIPC reduced the public debt from over 150 percent of GDP to 26 percent and created significant borrowing space. That era ended with the increase in public debt above sustainable levels.”
Bloomberg also recently quoted the Finance Ministry as saying that the country’s GDP would end the year at 3.2 percent.
But the Minister yesterday noted that in spite of unanticipated shortfalls in price and production of crude oil, GDP growth was “projected to end the year at 4.1 percent or better.”
Government has continued to alter figures since the 2016 Budget was presented in November last year to the extent that a government which inherited a GDP growth of 14 percent now wants to be commended for downsizing it to 4.1 percent.
Mr Terkper said there had been a number of challenges in the domestic and global economic environment since the presentation of the 2016 Budget to Parliament in November 2015 which had affected the assumptions underlying the budget.
“First, crude oil prices declined to a low US$28 per barrel (pbl) in January 2016 compared to the US$53.05 pbl used in the Budget. Even though the price has been rising from March 2016, the range of US$45—US$48 pbl, at end-June 2016, is still below the oil price projection used in the 2016 Budget.
“Secondly, the defects in the turret bearing of the FPSO Kwame Nkrumah adversely affected crude oil and gas production for the first half of 2016. Thirdly, despite the repairs made to the broken West Africa Gas Pipeline, increased rebel and pirate activities continue to adversely affect the supply of gas to Ghana. This has a negative impact on power supply and, consequently, full recovery of the economy.
These developments and in general, the sluggish commodity prices, will have implications for executing the 2016 Budget.”
By Samuel Boadi