GHANA’S PUBLIC debt increased to 76.6 per cent of GDP (GH¢332.4 billion) at the end of May 2021, compared with 76.1 per cent of GDP (GH¢291.6 billion) at the end of December 2020.
Of the total debt stock, domestic debt was GH¢170.8 billion (39.4 per cent of GDP) while the external debt was GH¢161.5 billion (37.2 per cent of GDP).
This happened on the back of an overall broad cash budget deficit of 4.6 per cent of GDP, against the target of 4.4 per cent of GDP for the first five months of 2021, which impacted the stock of public debt, provisional data on the budget execution indicated.
Primary Balance
The primary balance also recorded a deficit of 1.6 per cent of GDP compared to the target deficit of 0.9 per cent of GDP.
Revenue and Grants
Over the period, total revenue and grants amounted to GH¢22.6 billion (5.2 per cent of GDP), below the projected GH¢26.0 billion (6.0 per cent of GDP).
Expenditures and Arrears
Total expenditures and arrears clearance amounted to GH¢42.7 billion (9.8 per cent of GDP), marginally below the programmed target of GH¢45.0 billion (10.4 per cent of GDP).
Dr. Ernest Addison, Governor of the Central Bank, disclosed this in a press release at the 101st Bank of Ghana Monetary Policy Committee meeting in Accra.
Commodity Prices
Commenting on the external sector, he said
“Crude oil prices have remained bullish since the beginning of the year due to a rebound of economic activity alongside production limits by OPEC+. The average price of crude oil went up by 46.0 per cent on a year-to date basis to US$73.3 per barrel in June 2021. Gold prices declined marginally by 1.2 per cent to average US$1,829.3 per fine ounce in June 2021. Gold prices have rallied since the pandemic started due to the safe-haven appeal of the metal amid an uncertain global environment.”
Cocoa Price
The BoG Governor continued that “The average price of cocoa however, decreased by 6.7 per cent to trade at US$2,493.0 per tonne due to ample supply from major cocoa producers and reduced demand from processors and consumers, especially in Europe.”
Recommendation
Dr. Addison, who is chairman of the MPC, advised that going forward, expenditure has to be aligned to revenue performance to support the fiscal consolidation efforts.
“At 76.6 per cent of GDP in May 2021, the level of public debt raises debt sustainability concerns and the committee reiterated the importance and urgency of fiscal consolidation efforts. Greater efficiency in debt management would be required, especially in the face of potential further tightening of global financing conditions which could heighten rollover risks and access to new financing in the outlook. “This calls for strong vigilance and complementarity in fiscal and monetary policies to signal to the markets a strong commitment to consolidation.”
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