The Finance Ministry has dismissed reports that Ghana’s economy is running into financial challenges, saying, the country does not face any imminent external imbalances or reserves shortfall.
Bloomberg last week reported that “Ghana Debt Moves Deeper into Distress as Investors lose Patience”.
But the Finance Ministry said “like all emerging market countries with foreign investor participation in our domestic debt, Ghana is susceptible to a tighter US Monetary Policy stance. However, Ghana has healthy reserves of over 5 months of import cover amidst reduced levels of foreign investor participation in our domestic market. As of November 2021, our data indicates that only 16.55% of our domestic debt is held by non-residents investors as compared to 38.44% and 30.01% in 2017 and 2018, respectively”, it pointed out.
Explaining further, it said “whereas we acknowledge that the current trading levels of our Eurobonds have widened, we do not believe that it is warranted nor do we believe that it reflects the strong underlying fundamentals of the Ghanaian economy and our rapid rebound post the Covid-19 pandemic as evidenced by the healthy Gross Domestic Product growth of 6.6% for the third quarter alone and an average of 5.2% for the first three quarters of 2021. While the end year growth targets for 2021 has been revised to 4.4%, high frequency indicators suggest a continued strong momentum in economic activity in the fourth quarter”.
Despite the global challenges that exists on the back of the Covid-19 pandemic and especially in emerging markets, the Finance Ministry reassured all its investors that Ghana’s fundamentals remain strong as attested to by the growth in the third quarter 2021, the Ghana Revenue Authority exceeding its target in 2021 and the strong reserves position.
Finance Ministry dismisses Bloomberg’s report
The Finance Ministry dismissed Bloomberg’s report, saying, there are some serious factual errors in the article, which may give investors some cause for concern, if not corrected.
“For example, Bloomberg stated 81.5% as end of year debt to GDP ratio. This is incorrect. Our provisional nominal debt to GDP, as at the end of November 2021 was 78.4%, which is the latest data available. December revenue collections are seasonally the largest for any year, it is unlikely that our financing requirements in December will result in us exceeding 80% debt to GDP by December 2021”, it stressed.
It further added that financing of the additional Covid-19 related expenditures, in addition to revised revenue targets, due to the impact of the pandemic, led to an increase in debt-to-GDP from 62.4% in 2019 to 76.1% in 2020.
The Finance Ministry alluded that the current 78.4% debt-to-GDP ratio as at the end of November 2021 indicates rather a reduction in the rate of debt accumulation (a declined by a half to 18% as of November 2021 from 34% in 2020).
“This attests to an improvement in our debt and liability management, contrary to what the article seeks to suggest. Furthermore, with the positive Primary balance target for 2022 – one of the key fiscal anchors in 2022 – Ghana should see improved stability and reduction in the debt to GDP ratio in 2022 and through the medium term”, it concluded.
Source: myjoyonline.com
