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COVID-19 and cedi depreciation to push debt stock to 76.8% of GDP – Seth Terkper

COVID-19 and cedi depreciation to push debt stock to 76.8% of GDP – Seth Terkper


Former Finance Minister, Seth Terkper, has revealed that the nation’s debt stock to Gross Domestic Product (GDP) could go as high as 76.8 percent by the end of 2020.

The possible hike in the country’s total debt, according to Mr. Terkper, will be the result of a prolonged Covid-19 crisis as it will add to borrowing pressures which eventually will push the debt ratio beyond 70 percent of GDP.

The trajectory for the public debt at the end of 2020 is worrisome as the coronavirus crisis merely adds to existing financing pressures. A prolonged Covid-19 crisis will add to borrowing pressures, worsen the large financing gap and push the ratio beyond 70 percent, he wrote in an article to dispute the Central Bank’s claim that Ghana’s debt-to-GDP ratio was 59.3 percent at end-March, 2020.

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Disputing the Central Bank’s 59.3 percent debt ratio at end-March 2020, Mr. Terkper asserted that reports from the International Monetary Fund (IMF) indicate that debt ratio at end-December 2019 was 63 percent, further stating that the IMF’s Article IV and Rapid Credit Facility report in March, revealed that an additional 5.4 percent had been added to the debt stock currently making it 68.7 percent (including banking bailouts and energy sector costs).

The additional 5.4 percent debt stock comes from the US$3 billion bonds issued in February 2020, the Covid-19 US$1 billion concessional loans, coupled with higher expenditures and slow growth.

Mr. Terkper further revealed that rating agencies like Fitch forecast a worsening debt ratio owning to wider fiscal deficit and continuous cedi depreciation.

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The projection for public debt is an increase from 56.85 percent at end-2016 to 76.8 percent at end-2020, he wrote.

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