Latest figures from the Bank of Ghana suggest that Government’s debt management strategy was successful in reducing the debt-to-GDP ratio from 73.3% in 2016 to 69.8% at year end 2017.
The ratio which measures the sustainability threshold of the country’s debt, has been a subject of intense public debate over the years. Many Economic observers were unsure if government could meet its target of a promised reduction in the debt to GDP ratio.
The Akufo-Addo government announced a strategy to reduce Ghana’s debt burden to sustainable levels upon assuming power in January 2017. Prior to assuming power, the debt-to-GDP ratio had risen significantly as a result of high annual rates of debt accumulation.
But Government’s economic management team through a combination of reducing debt accumulation and boosted GDP growth has seen to the reduction of the ratio from 73.3% to 69.8%
The 70% threshold is traditionally viewed as an undesirable threshold beyond which a nation could be at risk of debt distress and may default on debt repayment. It has the added risk of putting the nation in a debt cycle as it may require new borrowing to pay off old debts as well as cause debt servicing commitments to crowd out future investment expenditure.
While in nominal terms the debt stock has hit 142.5 billion cedis, the improved GDP position means the risks associated with it have been mitigated.
“Government has been explaining that it expects a further gradual reduction in the medium term to anchor the improving sustainability situation and in so doing reduce the risks associated with the national finances,” the Deputy Minister of Information Kojo Oppong Nkrumah said.
Source: Ghana/Starrfmonline.com/103.5FM
