Former Finance Minister, Seth Terkper has warned that the worst thing that could happen to Ghana at this point as the economy strives to rebound will be to default on debt repayments.
The remarks were made as part of a dialogue on the state of the Ghanaian economy hosted by the former Finance Minister, on the theme “Inflation, Exchange rate and budget challenge: which way out ?”.
Data released by the Bank of Ghana put Ghana’s total public debt stock as of March 2022, at US$ 55.1 billion or GH¢391.9 billion.
In Dollar terms, the debt dropped by over $3 billion in the first 3 months of the year, from $58.4 billion in January to $55.1 billion in March.
In Cedi terms, however, the total debt stock within the first 3 months of this year increased by about GH¢ 40 billion, from GH¢351.7 billion in January 2022, to GH¢391.9 billion in March 2022 mainly due to the depreciation of the Cedi against the US Dollar.
The high debt levels, and high-interest payment realities of the country, coupled with other issues such as downgrades by rating agencies, have seen the country locked out of the Eurobond market. Some have charged government to go to the International Monetary Fund (IMF) to pave the way for Ghana to return to the markets.
Responding to a question on whether Ghana needs to go to the International Monetary Fund (IMF), Former Finance Minister Seth Terkper noted that the priority of government should be on ensuring that it doesn’t default on its debt repayment.
“I would sound a note of caution and it’s that the worst thing that could happen to us is to default. Given the fact that our turning to the domestic market to finance the budget is not working out as planned because of the auction shortfalls and the rest.”
According to Mr. Terpker government now needs to take drastic measures if it doesn’t want to return to the Bretton Woods institution.
“They need to come out with a homegrown policy. My only worry is that despite the mention of a homegrown policy by government agents I have not seen it. It may exist internally. If it exists in the budget then the markets don’t have any confidence in it. We, therefore, need to do something very drastic on our own, which will be laudable.”