Debt Swallows Ghana, Business Environment Poor-IMF & World Bank

The debt-to-GDP is the ratio of a country’s public debt to its gross domestic product (GDP). By comparing what a country owes with what it produces, the debt-to-GDP ratio indicates its ability to pay back its debts.

The Bretton Woods institutions of the World Bank and the International Monetary Fund (IMF) have issued damning reports that show that all may not be rosy for Ghana’s economy as debt to GDP has almost hit HIPC levels, while the World Bank’s latest report shows a poor business environment in Ghana.

These two reports are despite the fact that in the past few weeks, both institutions have been serenading Ghana on how promising its economic prospects are.However, on paper, the IMF is projecting a worse prospect for the public debt stock in relation to its Gross Domestic Product (GDP) It projects debt to GDP to hit s staggering 63% by the end of 2019.

This was contained in a statement issued by IMF staff after their latest mission to Ghana for the Article IV Consultation which is a routine practice of the IMF to assess the economic and financial development of its member states.The projection of Ghana’s debt profile is dangerously close to the dreaded debt unsustainability levels of 70% debt to GDP ratio. This levels drove Ghana to the status of Highly Indebted Poor Country (HIPC) in the early 2000s.

The stock of public debt rose to 59.4 per cent of GDP (GH¢205.6 billion) at the end of July 2019 compared with 53.1 per cent of GDP (GH¢159.7 billion) at the end of July 2018. Of the total debt stock, domestic debt was GH¢98.4 billion (28.4 per cent of GDP), of which GH¢10.7 billion (3.1 per cent of GDP) represented bonds issued to support the financial sector clean-up, while external debt was GH¢107.2 billion (31.0 per cent of GDP).This high debt rate is hitting an Akufo Addo administration which insisted during campaigns in 2015/2016 that borrowing will be its least priority and that borrowing is a lazy approach to economic management.

Meanwhile, a report by the World Bank-the IMF’s sister agency has dropped Ghana’s competitiveness in the business environment by four points for 2020.The World Bank’s latest report,“Ease of Doing Business”,  ranked Ghana at 114 with a score of 60.4 in 2019, but has lowered its expectation for 2020 by ranking the country at 118 with a slightly lower score of 60.Doing Business 2020 is a World Bank Group flagship publication, and it is the 17th in a series of annual studies which provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level.