Finance Minister admits Ghana’s public debt above sustainable levels

The Minister of Finance, Seth Terkper has admitted that Ghana’s public debt is above sustainable levels.

Making a case in Parliament yesterday for a supplementary budget of GH¢1.8 billion to finance government spending he said the nation’s public debt had risen from a low 26 per cent to 72 per cent of GDP by end of 2015 to 63 per cent end of May 2016.

“The nation’s public debt level rose rapidly from a very low 26 per cent in 2006—with the steepest post-HIPC increase of 31 per cent in 2007—to approximately 72 per cent 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,” he said.

He added, “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. 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 amount of debt is approximately over GH¢100 billion.

He also noted that the budget deficit is narrowing, as the government raises more domestic revenues and curtail expenditure overruns.

“Though the debt level is declining, we are able to continue the rapid expansion of infrastructure through prudent project management. The currency has been fairly stable; and private sector confidence is bouncing 
back. All these point to a turnaround and very bright prospects for the economy. As promised when we launched the Home Grown policies, the trend provides us with the opportunity to remove the temporary taxes—the Fiscal Stabilization Levy and the Temporary Import Duty—that helped reverse course, in the near term,” he said.

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By Emmanuel K. Dogbevi