The World Bank has characterised Ghana as a country with a high risk of debt distress.
This, however, does not mean the country’s debt is higher than others.
Ghana before covid recorded positive growth and was considered as one of the highest growing economies but like many countries, covid has declined the country’s growth.
Although Ghana is one of two countries that recorded a small growth in 2020 despite covid, its debt is quiet high resulting in the country being characterised as a high risk of debt distress.
These were the words of Mr Pierre Laporte, World Bank Country Director for Ghana, Liberia and Sierra Leone when he appeared on the Class Morning Show (CMS) on Class91.3FM on Monday, 16 August 2021.
Ghana’s public debt stock shot up by GHS27.8 billion in April 2021 and May 2021 to GHS332.4 billion, according to the Bank of Ghana. This is equivalent to GHS57.9 billion, about 76.66 percent of Gross Domestic Product.
Mr Laporte told show host Kofi Oppong Asamoah while discussing matters relating to Ghana’s economy that: “Ghana’s economy before Covid was one of the highest growing economies in the world actually and we are talking about 6 or 7 percent annually. Of course covid hit Ghana like it hit everyone [but] the encouraging thing is that most countries in the world also declined in growth in 2020 and Ghana happened to be one of the two countries that still recorded a small positive growth because it handled covid economic effect better than others and also what we observed is that the recovery has been stronger than the rest of the region…”
The World Bank Country Director was, however, worried about the countries high debt.
He said: “Ghana’s debt is quiet high, HIPC is no longer relevant, there’s no more HIPC… but what we do constantly is debt sustainability analysis with the IMF almost annually or every two years.
“In the case of Ghana, what the latest figures show is that Ghana’s debt to GDP ratio is close to 80 per cent or about 70 per cent and it should be noted that before covid it was a bit lower than that, it was in the sixties so covid has contributed to Ghana’s debt like every country in the world.
“So what we are saying is Ghana is a high risk of debt distress. What this means is that Ghana is more at risk of going to default or distress if certain things happen. For instance, Ghana depends on oil, so if oil prices were to crush, this will put Ghana at a much more uncomfortable position vis-à-vis payment of its debt.
“If gold prices or commodities Ghana export go down, if for whatever reason domestic revenue which are already very low go so low because of a shock, then Ghana will have trouble fully servicing its debt.”
Mr Laporte, however, clarified that this “characterisation…it doesn’t mean because you are high risk your debt level is higher than others, it means that other factors or risk of occurrences happening like external or domestic shocks, then you’re at risk…”
Source: Mynewsghana
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