Minister of State nominee at the Finance Ministry, Mr Charles Adu Boahen, has told Parliament’s Appointments Committee during his vetting on Wednesday, 2 June 2021 that the GHS21 billion expended on COVID-19 by the government of Ghana makes up 13% of the country’s GDP.
“COVID-19 cost us about GHS21 billion”, he said, explaining: “Of that amount, about GHS18 billion … was funded through borrowing, and the rest came to us as grants” and “some monies from the Stabilisation Fund”.
Latest figures from the Bank of Ghana’s Summary of Economic and Financial Data show that Ghana’s debt stock rose by GHS13 billion to hit GHS304.6 billion as of March 2021, representing 70.2% of Gross Domestic Product (GDP).
The additional GHS13 billion debt came about between December 2020 and March 2021.
The $3 billion Eurobond raised by the government in March substantially constituted to the GHS13 billion rise in debt.
Ghana’s total debt stock, as of December 2020, was GHS291.6 billion.
Of the total debt stock, the domestic debt is GHS163.6 (37.3% of GDP) as of the end of March 2021.
It was GHS149.8 billion in December 2020.
The external debt component was GHS141 billion (37.7% of GDP).
During the presentation of the 2021 budget and fiscal policy statement in March this year, caretaker Finance Minister Osei Kyei-Mensah-Bonsu said the cost incurred in the fight against COVID-19, the financial sector clean-up as well as the payment of excess capacity charges, pushed Ghana’s debt stock to GHS291.6 billion as of that time.
It represents 76.1 per cent of the country’s GDP compared with GHS122 billion, which represented 56.9 per cent of GDP in 2016, the Majority Leader told Parliament on Friday, 12 March 2021.
In explaining what accounted for the debt stock, the Minister of Parliamentary Affairs said the fiscal impact of COVID-19 was GHS19.7 billion while the cost of the financial sector clean-up was GHS21 billion.
Additionally, he noted that GHS12 billion was spent on excess capacity charges paid to independent power producers (IPPs).
Without the three costs, the Suame MP said the debt stock would have been hovering around GHS238.9 billion, representing 58.7 of GDP.
He said the force majeur forced the revision of the growth rate from an average of 7% between 2017 and 2019 to 0.9% in 2020.
Between 2004 and 2008, Ghana’s debt stock increased by 30% under the Kufuor-led administration of the New Patriotic Party.
Between 2008 and 2012, he said the debt stock jumped to 269% under the Mills administration of the National Democratic Congress (NDC) and 243% between 2012 and 2016 under the Mahama government.
Mr Kyei-Mensah-Bonsu also noted that between 2016 and 2020, the country’s debt stock had risen by 137% under the Akufo-Addo administration.
Read below excerpts of what the minister said in relation to the debt stock when he read the budget in March:
Public Debt Development
- Mr. Speaker, the provisional debt stock as at end-December 2020 stood at nominal figure of GH¢291,614 million, representing 76.1 percent of GDP compared to GH¢217,991 million, equivalent to 62.4 percent of GDP in 2019.
- Mr. Speaker, the total debt stock mix was made up of a provisional figure of GH¢141,780.60 million for external debt and GH¢149,833.89 million for domestic debt, accounting for approximately 48.6 percent and 51.4 percent of the total public debt stock, respectively. As a percentage of GDP, external and domestic debt represented 36.99 percent and 39.09 percent, respectively.
- Mr. Speaker, the total public debt has increased from GH¢122 billion (56.9% of GDP) in 2016 to GH¢ 291.6 billion (76.1% of GDP) at the end of December 2020. Included in the debt stock and the debt/GDP ratio at the end of 2020 are the following non-recurrent burdens that we had to deal with as matter of urgency:
• Fiscal Impact of COVID-19 – GH¢ 19.7 billion;
• Cost of Financial Sector Clean up – GH¢ 21 billion;
• Cost of Excess Capacity Charges paid to IPPs – GH¢ 12 billion;
• The impact of the reduction in growth from an average of 7% (2017-2019) to 0.9% in 2020.
- If these expenditures are excluded and the drop in GDP growth in 2020 primarily attributable to the COVID-19 pandemic is taken into account, the total stock of debt for 2020 would have been approximately GH¢ 238.9 billion implying a debt to GDP ratio of 58.7%.
- Mr. Speaker, the following information is useful:
• Between 2004 and 2008, Ghana’s debt stock increased by 30%.
• Between 2008 and 2012, the debt stock increased by 269%.
• Between 2012 and 2016, the increase in the debt stock was 243%.
• Between 2016 and 2020, the increase in Ghana’s debt stock was 137% (This includes the cost of the banking sector clean-up, excess capacity charges and the impact of the COVID-19 pandemic).