The World Bank has projected that Ghana’s debt to Gross Domestic Product (GDP) will be 104.6% by the end of 2022.
The World Bank has thus classified the West African country as a high debt distress nation.
According to the Bank’s October 2022 Africa Pulse Report, Ghana’s debt is expected to jump from 76.6% because widening government deficit, massive weakening of the cedi, and rising debt service costs.
The report is also forecasting Ghana’s debt to GDP of 99.7% and 101.8% of GDP in 2023 and 2024, respectively.
Ghana is expected to spend about 70% of its revenue this year to service debt. Meanwhile, the size of the country’s economy is estimated at about $72 billion.
The report is coming at a time the Bank and the International Monetary Fund (IMF) are conducting a Debt Sustainability Analysis on the country. A country that is high debt distressed is unable to fulfill its financial obligations and therefore debt restructuring is required.
“Debt is expected to jump in Ghana to 104.6% of GDP, from 76.6% a year earlier amid a widened government deficit, massive weakening of the cedi, and rising debt service costs. The country’s debt is expected to remain elevated at 99.7% and 101.8% of GDP in 2023 and 2024, respectively.
“Tightening of financial conditions globally along with the fall of the domestic currency widened the sovereign spread by 233 basis points since December 2021”.
“As a result, the country lost access to international markets”, the report mentioned.
“Nevertheless, despite the negotiation with the IMF, investors remain nervous about the country’s debt sustainability,’’ the report added.
The World Bank further stated that Ghana needs $1.5 billion in assistance from the IMF, which could help to shore up public finances and regain access to credit markets.