Public Debt: Midyear Budget Review filled with inconsistencies- NERA

New Era Africa (NERA), a civil society organization specialized in economic research and policy analysis have critiqued the 2019 Midyear Budget statement issued by the Ministry of Finance last Monday 29 July, 2019.

According to the NERA, the public debt portfolio of the country as presented by the Finance Minister, Ken Ofori Atta is filled with numerical inconsistencies and thus must be clarified as soon as possible.

Per their analysis, “the public debt stock stood at about GH¢203.8bn (59.2% of GDP) as at the end of
June 2019. This is made up of GH¢107.6bn (52.8%) foreign debt and GH¢96.3bn
(47.2%) domestic debt. This means that, the debt stock increased by about GH¢30.8bn
from December 2018 to June 2019”

Vice President of NERA, in-charge of Economic Research and Policy, Emmanuel Zewu explained that the variations in both the public debt stock and external debt stock are unjustifiable.

“We however have challenges reconciling the data provided in the 2019 budget review statement. According to the statement, paragraphs 60 and 105; the domestic public debt stood at GH¢86.9bn at the end of 2018 and GH¢96.3bn at the end of June 2019. This indicates an increase of GH¢9.4bn over the period. In addition, the external public debt stock stood at GH¢86.2bn at the end of 2018 and GH¢107.6bn at the end of June 2019. This shows an increase of GH¢21.5bn in the external debt stock within the period.

“This is lower than the GH¢23.8bn captured in paragraph 107 of the statement or 86
of the abridged version presented to Parliament. Could it be that the reported GH¢9bn which was due to exchange rate depreciation was actually GH¢6.7bn? Assuming that the reported GH¢23.8bn increase in the external debt is correct and the GH¢9.4.bn increase in the domestic debt is also correct, then the total increment in the public debt should not be GH¢30.8bn as suggested by the figures presented.

“It would have been GH¢33.2bn, which bring the total debt stock to GH¢206.3bn instead
of the reported GH¢203.8bn. We recommend that government clarify this issue” he clarified.

He warned, based on their analysis that the country risk going back to the International Monetary Fund (IMF) for a bailout should the accumulating debt is not managed.

“The above notwithstanding, Ghana risks going back to the IMF if the current rate of
debt accumulation is not checked. Using the reported figure of GH¢203.8bn, Ghana’s
public debt increased by 66 percent from GH¢122.6 billion at the end of 2016. This
represents about GH¢81.2bn rise and an average of about GH¢2.7 billion accumulation per month (about GH¢90 million a day) over the period. The rebasing of the economy resulted in about 12.4 percentage points reduction in the debt to GDP ratio. A reduction in the debt to GDP ratio because of rebasing does not mean an increase in economic activity and hence high tax revenues for government” Mr Zewu explained.

“Government’s assertion that it is aware of this and the process will not influence debt
accumulation does not reflect in the current trend in debt accumulation. Finally, we are worried by the extent of debt accumulation post rebasing. It is worrying to see the debt stock increase from 51% to GDP in May 2018) to over 59% to GDP in June 2019). The level of depreciation coupled with likely spending  pressures particularly as the country approaches election year gives a very worrying signal.

“Again, it is also worrying that due to the debt overhang, the country spends over GH¢18bn on just interest payment. This trend is not helpful as the country desires to embark on the needed growth path. Hence, we argue government to revise the current trend to reflect its earlier assertion that rebasing will not influence its borrowing decisions” he emphasised.