Ghana’s debt to GDP is 78.4%, not 81.5% - Finance Ministry

Ghana’s debt to GDP currently stands at 78.4 percent and not 81.5 percent as reported in a Bloomberg article, the Ministry of Finance has clarified.

The Ministry of Finance said that Bloomberg gave wrong historical debt to Gross Domestic Product (GDP) figures of Ghana in its reportage.

In dismissing the report, the Ministry pointed out that the piece contained several severe factual mistakes that, if not remedied, could lead investors to be concerned.

In setting the record straight, the Ministry in a statement cited an instance where the report indicated that Ghana’s end-of-year debt-to-GDP ratio was 81.5 percent.

“This is incorrect. Our provisional nominal debt to GDP, as at the end of November 2021 was 78.4 percent, which is the latest data available. December revenue collections are seasonally the largest for any year, it is unlikely that our financing requirements in December will result in us exceeding 80 percent debt to GDP by December 2021,” it noted.

“The Bloomberg article gave wrong historical debt to GDP figures. It is essential we make the correction that Ghana’s debt to GDP figures a decade ago were 39.67 percent and 47.80 percent for 2011 and 2012, respectively, and not 31.4 percent as stated in the Bloomberg publication. Again, it is important to note that for the period prior to the COVID-19 global pandemic, Ghana experienced an average debt-to-GDP ratio of 56.4 percent from 2015 to 2019. In 2020, Ghana’s GDP grew by 0.4 percent because of the impact of the Covid-19 Pandemic on the economy,” it noted.

Providing clarity

Additionally, the Ministry explained that the increased COVID-19-related expenses, combined with reduced income objectives as a result of the pandemic’s impact, resulted in an increase in debt-to-GDP from 62.4 percent in 2019 to 76.1 percent in 2020.

The Finance Ministry said that the current debt-to-GDP ratio of 78.4 percent, at the end of November 2021, shows a slower rate of debt buildup (a declined by a half to 18 percent as of November 2021 from 34 percent in 2020).

“This attests to an improvement in our debt and liability management, contrary to what the article seeks to suggest. Furthermore, with the positive Primary balance target for 2022 – one of the key fiscal anchors in 2022 – Ghana should see improved stability and reduction in the debt to GDP ratio in 2022 and through the medium term,” it said.

Ghana’s financial situation, according to the Finance Ministry, is neither threatened by foreign imbalances or a shortage of reserves.

“The reserves, at over 5 months of import cover, is well above our internal target of four months and better than the average over the previous two decades. Foreign financing of the 2022 Budget, of $1.5 billion is also bolstered by the balance of Special Drawing Rights of approximately $700 million,” portions of the statement read.

Responding to the Bloomberg report which stated that “Ghana Debt Moves Deeper into Distress as Investors lose Patience,” the Finance Ministry said, “like all emerging market countries with foreign investor participation in our domestic debt, Ghana is susceptible to a tighter US Monetary Policy stance. However, Ghana has healthy reserves of over 5 months of import cover amidst reduced levels of foreign investor participation in our domestic market,”

“As of November 2021, our data indicates that only 16.55 percent of our domestic debt is held by non-residents investors as compared to 38.44% and 30.01% in 2017 and 2018, respectively,” it pointed out.

“Whereas we acknowledge that the current trading levels of our Eurobonds have widened, we do not believe that it is warranted nor do we believe that it reflects the strong underlying fundamentals of the Ghanaian economy and our rapid rebound post the Covid-19 pandemic as evidenced by the healthy Gross Domestic Product growth of 6.6 percent for the third quarter alone and an average of 5.2 percent for the first three quarters of 2021. While the end year growth targets for 2021 has been revised to 4.4 percent, high frequency indicators suggest a continued strong momentum in economic activity in the fourth quarter,” it added.