Ghana's public debt stock must be monitored carefully since the rebasing of the economy has created an artificial fiscal space which gives government further space to borrow more, some economists have cautioned.

After the rebasing of Gross Domestic Product (GDP) based on measurements from 2013 instead of 2006, the Ghanaian economy is worth GH¢256.6 billion.

The rebased GDP has reduced the country’s debt-to-GDP ratio and thus increased the appetite for borrowing.

According to data from the Bank of Ghana (BoG), Ghana’s public debt increased to GH¢170.8 billion representing 57.2 percent of GDP at the end of September 2018 from GH¢138.8 billion 54.1 percent of rebased GDP the same period a year earlier.

Interest payments crowding out capital expenditure

According to Dr Raziel Obeng-Okon of the Ghana Institute of Public Administration (GIMPA), “already our huge interest payment is crowding out capital expenditure and putting undue stress on government payroll.” Expenditure on goods and services is estimated to be at GH¢ 6.3 billion while interest payment of public debt is expected to reach GH¢ 18.6 billion, according to the 2019 budget.

Banking sector crisis adds to debt overhung

The cleaning of the banking sector has created a contagion effect due to liquidity challenges. Analysts had urged the Ministry of Finance and Bank of Ghana to take a second look at the features of the bond created for the Consolidated Bank Ghana Limited to manage 7 banks it had assumed.

“This has been become necessary to eradicate or reduce the impact of the contagion effect on the other segments of the financial services sector,” Dr Obeng-Okon observed.

Economist, Dr Lord Mensah, with the University of Ghana Business School noted that Ghana had long been captured as a debt distressed country, having inched into the 70 per cent debt-to-GDP threshold, however, the rebasing of the economy had reduced the ratio, “even though the debt level itself was far from satisfactory.”

Dr Mensah was unhappy Ghana had developed the penchant for running to the international capital market to source for funds, a development he described as unfortunate.”

“Our frequent visits to the Eurobond market isn’t one which we should be celebrating, because whatever we have been borrowing has never marched up with the infrastructure development back home,” Dr Mensah observed.

He lamented the state of infrastructure in Ghana, blaming governments for the lack of continuity of infrastructural projects.

EIU reviews 2011 growth downwards

One of the negative outcomes of rebasing Ghana’s economy has been the reviewing of one of the country’s highest growth numbers, achieved in 2011.

Following the rebased Gross Domestic Product (GDP), the Economist Intelligence Unit (EIU) has reduced its forecast for GDP growth in 2011 from 14 to 8.9 per cent.

The Unit noted that though the rebasing had massively increased the value of GDP and significantly altered all of Ghana’s GDP-related economic indicators, the increased size of the economy did have some downsides.

“As well as highlighting the poor domestic tax take it also means that the onset of oil production will not have as big an effect on the overall economy as previously thought.”