We warned gov’t over reckless spending; classification of Ghana as high debt distressed is not surprising – Ablakwa

Member of Parliament for North Tongu, Samuel Okudzteo Ablakwa has said that it is not surprising that the World Bank has classified Ghana as a high debt distressed country.

In the view of Mr Ablakwa this is a result of the government’s reckless and profligate expenditure.

He said President Nana Addo Dankwa Akufo-Addo and the Vice President Dr Mahamadu Bawumia were warned against this kind of spending but they did not listen.

“Ghana’s latest depressing classification by the World Bank as a high debt distressed country doesn’t come as a surprise.

“For years, we warned about the Akufo-Addo/Bawumia govt’s reckless & profligate expenditure patterns but they refused to listen,” Mr Ablakwa tweeted.

The World Bank has projected that public debt is projected to nudge up in non-resource-rich countries, up to 65.6 percent of Gross Domestic Product (GDP) in 2022 from 65.1 per cent in the previous year.

Debt is expected to jump in Ghana to 104.6 percent of GDP, from 76.6 a year earlier amid a widened government deficit, massive weakening of the cedi, and rising debt service costs, the World Bank said.

“The country’s debt is expected to remain elevated at 99.7 and 101.8 percent of GDP in 2023 and 2024, respectively. Tightening of financial conditions globally along with the fall of the domestic currency widened the sovereign spread by 233 basis points since December 2021.

“As a result, the country lost access to international markets. It needs $1.5 billion in assistance from the IMF, which could help to shore up public finances and regain access to credit markets,” it said in its its October 2022 Africa Pulse Report,

It added that “Nevertheless, despite the negotiation with the IMF, investors remain nervous about the country’s debt sustainability.

“These concerns were expressed by the country’s local and foreign currency ratings downgrade from B-/B to CCC+/C. As a result, despite the news, the cedi fell further with ripple effects on inflation.”

Local analysts had earlier made similar projections.

For instance, a Former Deputy Finance Minister, Mona Quartey said if care is not taken Ghana’s  debt to GDP ratio will hit 90 per cent by the end of the engagement with the International Monetary Fund (IMF).

She indicated that at the moment Ghana’s debt is hovering around 78 per cent without the Sinohydro, Ghana Cocoa Board (COCOBOD) and the banking sector clean debts.

If these are added by the IMF team, then Ghanaians should expect the debt to cross 80 per cent, running into 90s, she said.

The International Monetary Fund (IMF) is reported to have asked Ghana to add the 2 billion Sinohydro loan from China and the 1.5 billion COCOBOD syndicated loan taken for the 2021/2022 season to its current debt stock.

Speaking in an interview with TV3’s Paa Kwesi Asare on the Business Focus programme on Monday September 26, Ms Quartey described the situation as dire.

“The situation is dire. Clearly, the debt sustainability assessment is going to tell us some more but even without that incremental information we are all aware that we are in debt distressed as a nation.

“Basically, even at the 78 pre cent that we thought we were as at June-July and now, with the news that IMF will like to add the Sinohydro debt and the COCOBOD debt which hasn’t been added hitherto, but will now be added, it will go to 80 per cent, that will take us way above the average debt to GDP ratio for most developing countries, which stands at about 60 per cent on the average. So we will be somewhere in the 80s if we are not careful by the end of this engagement.”