BoG explains why Ghana’s debt increased to GH¢344.5 billion by end of November 2021

The Governor of the Bank of Ghana (BoG) Dr Ernest Addison, has explained why Ghana’s public sector debt increased to 78.4 percent of Gross Domestic Product (GDP), GH¢344.5 billion, at the end of November 2021, compared with 76 percent of GDP, GH¢291.6 billion at the end of December 2020.

He explained that provisional data on budget execution for 2021 indicated an overall broad fiscal deficit – cash, excluding financial sector clean-up costs- of 9.7 percent of GDP, against the programmed target of 9.4 percent of GDP.

The corresponding primary balance for the period was a deficit of GH¢8.9 billion (2.0 percent of GDP), against a deficit target of GH¢8.7 billion, 2 percent of GDP. Over the year, total revenue and grants amounted to GH¢67.9 billion (15.4 percent of GDP), below the projected GH¢72.5 billion, 16.7 percent of GDP, he said.

Total expenditure amounted to GH¢110.4 billion, 25.1 percent of GDP, below the programmed target of GH¢113.8 billion, 25.9 percent of GDP.

“These developments impacted the stock of public debt which increased to 78.4 percent of GDP (GH¢344.5 billion) at the end of November 2021, compared with 76.0 percent of GDP (GH¢291.6 billion) at the end of December 2020. Of the total debt stock, domestic debt was GH¢179.4 billion (40.8 percent of GDP), while the external debt was GH¢165.1 billion, 37.6 percent of GDP,” he said at the Monetary Policy Committee (MPC) press conference in Accra on Monday January 31.

He further explained that credit performance improved marginally, consistent with the gradual recovery in the real sector. Annual nominal growth in private sector credit increased to 11.2 percent in December 2021 compared with 10.6 percent, in the corresponding period of 2020.

However, sustained price pressures weighed on real private sector credit, which contracted by 1.3 percent compared to modest growth of 0.2 percent, over the same comparative period.

“The COVID19 regulatory policy measures were kept in place during 2021 and helped provide some support to lending activities of banks. New Advances extended by the commercial banks to the economy was GH¢36.4 billion, registering a growth of 6.8 percent compared with new advances of GH¢34.1 billion extended in 2020. On the money market, interest rates reflected mixed trends across the yield curve.

“The 91-day and 182-day Treasury bill rates declined to 12.49 percent and 13.19 percent respectively in December 2021, from 14.08 percent and 14.13 percent respectively, in December 2020.

“Similarly, the rate on the 364-day instrument decreased marginally to 16.46 percent from 16.98 percent over the same comparative period. Rates on the 2-year and 5-year bonds increased to 19.75 percent and 21.00 percent respectively, from 18.50 percent and 19.85 percent respectively, while rates on the 3-year, 6-year, 7-year and 10-year bonds broadly declined.

“The rates on the 15-year and 20-year bonds, however, remained unchanged at 19.75 percent and 20.20 percent respectively, over the same comparative period.

“The weighted average interbank rate declined further to 12.68 percent from 13.56 percent, induced by persistent structural liquidity on the interbank market. This transmitted to the retail end of the market, and average lending rates of banks declined marginally to 20.04 percent in December 2021 from 21.20 percent recorded in the corresponding period of 2020.”