Ghana’s Finace Minister, Ken Ofori-Atta
Energy Sector Levy debt 2% of Ghana’s GDP, Fitch
Ghana’s debt constitutes 539% of government revenue, Fitch
Fiscal deficit to reduce to 9.1% of GDP in 2022
Ghana’s debt reached an estimated 83% of the country’s Gross Domestic Product (GDP) at end of 2021, Fitch Ratings has indicated.
According to a report by Fitch, debt amounting to approximately 2% of GDP has been accrued through the Energy Sector Levy Act as of the end of 2021
The report further forecasted that “government debt to remain on an upward path through 2025, but expected to grow at a slower pace as the primary deficit narrows in 2022 and 2023. Debt affordability metrics will remain weak.”
The report estimated that Ghana’s debt accumulated at the end of 2021 constituted 539% of government revenue.
“Interest payments were 44.6% of revenue in 2020 and the ratio is likely to continue rising through 2023, assuming a rising share of domestic debt in total debt in the absence of external financing options,” it added.
Fitch also indicated Ghana recorded a fiscal deficit of 12.5 percent as the end of 2021, however this deficit would reduce to 9.1 percent in 2022.
“Fitch forecasts the general government fiscal cash deficit to narrow to 9.1% of GDP in 2022 from 15.1% in 2020 and 12.5% in 2021 (including 3% of GDP in domestic arrears clearance and payments related to the state-owned energy sector),” the report said
“The 2022 deficit would still be more than twice the 2022 ‘B’ median of 4.6% and risk to public finances remain high. The government envisages a deficit (including financial and energy sector support) of 7.4% in 2022 and 5.5% in 2023, with a fall to below the legal deficit ceiling of 5% in 2024,” it added.
The possibility of an increase in the debt to GDP ratio as well as the estimated fiscal deficit for 2022 were among the reasons why Fitch downgraded Ghana’s credit ratings from B to B-.
Ghana’s high debt to GDP ratio shows that Ghana is less likely to pay back its debt and its risk of default is very high.