Finance

Ghana may struggle to raise the full $5bn it wants to borrow from international markets this year given the scale of its debts

 

 

The government plans to raise $889m from new taxes this year to contain its deficit. That commitment means the country “should be able to borrow”, says Charles Robertson, global chief economist at Renaissance Capital.

 

Still, Ghana’s debt level is amongst the highest of any country we look at, and without the backstop of an IMF deal,” Robertson says. It means they need to demonstrate a lot of fiscal restraint.

 

The slow pace of the consolidation path outlined in Ghana’s budget statement of 12 March leaves Ghana exposed to “risks of fiscal slippage”, according to Fitch Ratings. The budget aims to reduce the fiscal deficit from 13.8% of GDP in 2020 to below 5% by 2024.

 

Crunch time

 

Debt levels were already a concern before the Covid-19 pandemic, says Leeuwner Esterhuysen, an analyst at NKC African Economics in Cape Town. Esterhuysen estimates that government debt will rise to 92.1% of GDP this year, up from 86.9% in 2020.

 

Easy financing conditions have made tax collection less urgent in recent years, and Ghana’s government revenue-to-GDP ratio has slipped, Bohlund says. “This trend needs to be reversed.”

 

In 2019, tax revenue represented 12.2% of Ghana’s GDP, compared with 15.1% in Kenya. That is also behind Zambia, which defaulted on its debt in 2020 and has a five-year average of 18.5%.

 

With interest costs and the public-sector wage bill absorbing around 90% of government revenue, cutting the budget deficit will depend on increasing tax collection, which tends to be a gradual process, Bohlund says.

 

This will take the time that Ghana simply does not have, making any turnaround very difficult to envisage.

 

There is, Fitch, says “a significant risk that public finances could fall short of the goals outlined in the budget, particularly given the government’s lack of a clear majority in parliament.”

 

Bottom line

 

The pressure is on for President Nana Akufo-Addo to prioritise improving tax collection in his second term.

 

By: Abdul-Aziz Mohammed

Financial Analyst

 

Source: Thepressradio.com|Ghana|Dickson Boadi

Ogyem Solomon

Solomon Ogyem – Media Entrepreneur | Journalist | Brand Ambassador Solomon Ogyem is a dynamic Ghanaian journalist and media entrepreneur currently based in South Africa. With a solid foundation in journalism, Solomon is a graduate of the OTEC School of Journalism and Communication Studies in Ghana and Oxbridge Academy in South Africa. He began his career as a reporter at OTEC 102.9 MHz in Kumasi, where he honed his skills in news reporting, community storytelling, and radio broadcasting. His passion for storytelling and dedication to the media industry led him to establish Press MltiMedia Company in South Africa—a growing platform committed to authentic African narratives and multimedia journalism. Solomon is the founder and owner of Thepressradio.com, a news portal focused on delivering credible, timely, and engaging stories across Ghana and Africa. He also owns Press Global Tickets, a service-driven venture in the travel and logistics space, providing reliable ticketing services. He previously owned two notable websites—Ghanaweb.mobi and ShowbizAfrica.net—both of which contributed to entertainment and socio-political discussions within Ghana’s digital space. With a diverse background in media, digital journalism, and business, Solomon Ogyem is dedicated to telling impactful African stories, empowering youth through media, and building cross-continental media partnerships.

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