Economist and Finance lecturer at the University of Ghana Business School (UGBS), Professor Godfred Bokpin, has reiterated calls for government to sign onto an IMF programme to save the economy from a debt crisis.
According to Prof Bokpin, the best time for Ghana to have signed onto an IMF programme to save the country from the current economic challenges should have been in 2021, as failure on the part of government to do so as resulted in the present elevated risks facing the economy.
Speaking during an interview on Joy News’ PM Express, Prof Bokpin noted going for a Fund programme will give the government the much needed fiscal “breathing space” to build the necessary policy credibility to regain confidence in investors.
Adding that, it is not a bad thing for the government to go the IMF, as the Fund is not in the market to “punish” Ghana or any other country for that matter with the conditionalities it attaches to its loans.
“If you look at the borrowing costs right now and any attempt to mobilise even external funding right now is going to come at the higher costs. And that is why we are saying that going for an IMF programme is needed, and probably the funding arrangement in the end depending on the type of programme we go for, we may probably get close to $3 billion probably no interest cost.
“And that will reduce your interest costs, give you some breathing space and help you gather the necessary policy credibility and then you can build on that right.
“Because you see, the IMF is not in the market to punish the country. We’re talking about conditionalities and the rest, but these are things that we should have done probably over an extended period, which we failed to do and they are crystallising.
“So under a Fund programme, the IMF have to be able to neutralise that effect and it becomes a bit more painful. So what we call conditionalities and the rest of them are totally different actions that we should have taken like two years ago, three years ago, or maybe four years ago that we failed to do and these are the things that are driving the structural weaknesses. And therefore when you sign up on a programme depending on the nature of the programme, that will also determine the kind of reforms that we’ll have to do,” he remarked.
Ghana’s debt to GDP currently stands at 78% which tin monetary terms translates into some GHS 391.9bn.
The new debt figure of GHS 391.9bn represents an increase of GHS 40.2bn from the GHS 351.7bn (70.0% of GDP) total public debt recorded in January 2022.
On a year-on-year basis, the country’s debt marks an increase of GHS 87.3bn – from March 2021 to March 2022.
Accounting for the chunk of the country’s public debt was domestic debt which has now increased to GHS 189.9bn from the GHS 181.9bn recorded in January 2022.
On a year-on-year basis (March 2021 – March 2022), that represents an increase of GHS 26.3bn.
Domestic debt as a percentage of GDP as at end-March 2022, stood at 37.8%.
External debt under the review period also increased to GHS 201.9bn from GHS 169.8bn in January 2022.
On a year-on-year basis (March 2021 – March 2022), external debt grew by GHS 60.9bn – from GHS 141.0bn to GHS 201.9bn.
As a percentage of GDP, external debt as at end-March 2022, stood at 40.2%.
The country’s debt to GDP ratio is above the 70% debt-to-GDP maximum threshold, thereby putting the country at risk of debt distress.