Former Finance Minister Seth Terkper has revealed that Ghana risked returning to the International Monetary Fund (IMF) for support following the rising debt.
Mr. Terkper suggested to the government to draw a realistic budget and not to project higher growth.
His comments come after the Credit rating agency Moody’s has projected in its 2021 Sub-Saharan African (SSA) Outlook report that Ghana’s debt to GDP ratio will hit 80 percent in 2021.
The debt to GDP has already crossed the 70 percent threshold.
Moody’s said “We expect most SSA sovereigns to see their debt burdens rise further in 2021. The average debt burden in the region will hover around 64% of GDP in the near to medium term compared to the 47% average in 2015-19”, Moody’s said.
“We do not expect debt burdens to come down in the foreseeable future as revenue generation capacity remains weak”, it added.
It further indicated that the country will be ranked second in Sub Saharan Africa with the greatest External Vulnerability Stress pressures.
“In SSA, higher external vulnerability indicators – which are a measure of short-term debt and upcoming external debt maturities against international reserves – will be more challenging for sovereigns outside of monetary unions. Zambia and Ghana will see the greatest EVI pressures, with 2021 levels forecast to be 509% in Zambia and 143% in Ghana”.
Mr. Terkper told Accra base, Starr, on Tuesday, January 19 that“If we don’t want to go back to the IMF, then we have to start looking at a homegrown policy. What we have to do is not project higher growth figures and that will help us do a realistic budget. If the advanced economies begin to recover, their growth will increase the commodity they buy from us and that will also help us grow.”
It is recalled that last year when the IMF made similar projections, Finance Minister Ken Ofori-Atta described the projections as merely statistical.
He told TV3’s Etornam Sey in an exclusive interview on Monday, October 26 2020 that the government of Ghana was not too concerned about the debt because attention was focused on spending the funds to protect Ghanaians against the outbreak of the coronavirus pandemic.
The lives of the people, he said, mattered to the government than debt.
Similarly, he added, the government spent huge sums of money during the cleanup exercise in the banking sector which resulted in the collapse of nine domestic banks.
But Mr. Ofori Atta said “The IMF is expecting developed countries to have 125% debt to GDP ratio. Countries like ours are doing about 65%.
“When you discount what was spent on the financial service and on the energy sector, that brings it back. I guess the question for any nation at this pandemic time is, what you put forward first.
“The lives of the people who then become productive or you stick to some statistical numbers as an issue from stopping you from saving lives. I think we have chosen the latter.”