The Finance Minister, Ken Ofori-Atta, has given the assurance that the country’s debt to GDP, which is the total value of all goods and services produced, would not escalate to alarming levels with the issuance of the latest Eurobond.
Ghana’s debt to GDP is currently around 63 percent. Following Ghana’s eighth appearance on the Eurobond market this week, there are fears this may increase further.
But Mr. Ofori-Atta, speaking on Bloomberg TV on Wednesday, February 5, said the eventual payment of the energy sector debt and the returns from the export of commodities should help ease the public debt burden.
The IMF recently cautioned Ghana about the rising debt levels which it said could reach distress levels if not checked.
But Mr. Ofori-Atta said the debt problem is being caused by two specific issues which are the financial sector and the energy sector restructuring.
“So, if you net those costs out, debt will be around 58 percent or so of GDP. But the key to all of this is merely the export boost that we are expecting. And this will be outright boost, if you look at our non-oil contribution, that is about 5.4% growth, compared to the oil growth.”
“So, we have a much more diversified economy than most. And we expect to do that. As you know, the Africa Continental Free Trade, the headquarters is going to be in Ghana which means we are really going to be a pass-through for investors and trade into the future, and we are banking on Ghana becoming a regional hub with regards to financial services, aviation and logistics, trade etc.”
“Really for us, once we go through the rigidities and debt re-profiling, we are confident with the increase in revenue and export in other areas, we should be doing very well,” he added.
The cost of the financial sector resolution is estimated to be about GHS16 billion which is about 3 percent of GDP.
The energy sector has also seen government struggle to contain many power purchase agreements which require the government to pay millions of dollars for unused power.