The World Bank has cautioned Ghana against piling its external debt and exceeding the sustainability threshold.
According to the bank, Ghana is currently rated as a moderate to high-risk debt distressed country and so must tread cautiously.
The government last week raised US$3 billion on the Eurobond market.
The transaction was hailed as a success story following the issuance of a 41-year bond — the longest-dated issued by an African country.
Speaking to Citi Business News, the Country Director of World Bank-Ghana, Pierre Frank Laporte, indicated that the country must not cross the acceptable thresholds of debt sustainability.
“Countries, especially developing countries have to borrow because most of us do not have adequate resources to develop. We have to borrow to develop, but you have to borrow responsibly. At the moment Ghana’s debt situation based on World Bank’s description is a country at a moderate rate to high risk of debt distress, so of course, the country has to be careful,” he said.
“…But the country is at a stage where things are critical. I am confident that the Finance Minister and his team are fully aware of that, as we discuss all the time. Borrowing is not a bad thing, but you have to borrow on the right terms, the right amount and in the right way. Countries have debt strategies, so like I said, I am confident that the Ghanaian authorities know what they’re doing.”
The Finance Minister, Ken Ofori-Atta, last week gave 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 International Monetary Fund (IMF) recently cautioned Ghana about the rising debt levels which it said could reach distress levels if not checked.
According to the Bank of Ghana’s latest data on economic figures, this represents 62.1 percent of the total value of all goods and services produced in the country for the period.
Out of the amount, the external debt component reached GH¢111.9 billion, with the domestic component accounting for GH¢102.9 billion.
Source : CitiNewsRoom