Over 70% of tax revenues used for debt servicing

The Minister for Finance, Ken Ofori-Atta says more than half of Ghana’s total revenues and more than 70 percent of the nation’s tax revenues are used in servicing debts incurred by the State.

Speaking at the launch of Ghana’s Domestic Debt Exchange Programme on Monday, December 5, 2022, the Finance Minister said Ghana’s debt sustainability analysis indicated that the country’s debt is unsustainable.

“The Debt Sustainability Analysis (DSA) demonstrated unequivocally that Ghana’s public debt is unsustainable, and that the government may not be able to fully service its debt down the road if no action is taken. Indeed, debt servicing is now absorbing more than half of total government revenues and almost 70% of tax revenues, while our total public debt stock, including that of State-Owned Enterprises and all, exceeds 100% of our GDP. This is why we are today announcing the debt exchange which will help in restoring our capacity to service debt.”

The Minister said the reasons for the unbridled ballooning of the State’s debt included the “Covid-19 pandemic, rising global food prices, rising crude oil & energy prices; and the Russia-Ukraine war adversely affected Ghana’s macroeconomy, with spillovers to the financial sector.”

“The combination of adverse external shocks have exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget, which taken together have put our public debt on an unsustainable path,” the Minister added.

Mr. Ofori-Atta had earlier said that the country’s total debt stock shot up to GH¢450 billion in 2022 from a total of GH¢120 billion in 2017.

Ghana is currently seeking bailout support from the International Monetary Fund.

While the country has put a freeze on public-sector employment, it has also announced a debt restructuring programme to reduce the country’s debt burden.