Ghana is running out of fiscal space as its debt-to-GDP ratio reached 71% by Sept. 30, the highest in nearly four years, following early attempts to cushion the population from the impact of the coronavirus pandemic, its central bank said Monday.
The ratio grew to its highest since Nov. 2016, as the state subsidized electricity and power bills, while also providing loans to small businesses, Governor Ernest Addison told journalists after a policy rate announcement in Accra, the capital.
“The important point is whether the government will have enough fiscal space to continue providing support in 2021,” Addison said. “We are approaching the limit of what the government can do without trying to mobilize domestic resources.”
The pandemic response deepened the debt woes of Africa’s top gold producer. President Nana Akufo-Addo’s administration had already spent almost 23 billion cedis ($4 billion) on a financial sector cleanup since 2017, while also starting to address energy sector debt of more than 10 billion cedis. After reporting its first cases of the virus in March, the West African nation responded to the health crisis with more than 3 billion cedis in unplanned spending.
The government is planning to raise $5 billion on international capital markets to support its spending plan for next year. The budget deficit is set to decline to 8.3% of GDP in 2021, from an expected 11.4% gap by the end of this year.