Ken Ofori-Atta
STANDARD BANK Group Limited has stated that Ghana’s economy is on steep decline and requires sharper focus of the economic managers to address the issue of debt sustainability.
According to the continent’s biggest bank, Ghana, Kenya, Angola, Ethiopia and Zambia will face “debt risks over the next two years” since “extraordinary pandemic-induced stimulus and relief for poor nations” are moribund.
A report by Bloomberg News quoted the Head of African Research at the Standard Bank Group Limited, Jibran Qureishi, as saying that the bulk of Ghana’s debt is held by commercial lenders, which has “elevated pressure” on the country with its debt risks jumping on “deteriorating public finances.”
The report said the bank’s data on Ghana’s fiscal years pointed out that between 2020 and 2021, Ghana’s debt held by commercial lenders constituted 51.1%, and multilateral lenders constituted 33.5%.
It added that the country’s external debt held by bilateral lenders is 5.2%, concessional lenders is 6.2% and export credit agencies held only 3.9% as against 8.4% between 2014 and 2015 and 11.3% between 2011 and 2012.
The report stated that between 2014 and 2015, concessional lenders held 13.6% of Ghana’s debt, while commercial lenders held only 16.4%, and 36% for multilateral lenders.
The Johannesburg-based lender reportedly said while Ghana is the “fragile five” of 18 countries covered in a recent report, Uganda is among the continent’s brightest stars in 2022.
The bank asserted that Ghana probably needs an International Monetary Fund (IMF) package to restore confidence in investors, noting that holding the nation’s debt currently demands a premium over U.S. treasuries of more than 1,000 basis points, a level considered distressed.
“Lenders see a re-financing in the Eurobond market to be unviable when the U.S. Federal Reserve increases interest rates and if Ghana’s budget targets prove elusive,” Bloomberg News again reported.
With China more cautious about lending to African nations, the IMF is Ghana’s main hope if the country can’t improve its fiscal position, Mr. Qureishi is said to have stated, and added that stabilizing public finances may prove difficult given the government’s “overly ambitious” revenue estimates, while efforts to cut spending could face hurdles with public-sector wages and debt-service costs accounting for more than half of expenditure.
No IMF
However, the Finance Minister, Ken Ofori-Atta, insists going to IMF for a bailout is not an option, intimating that “whatever we do we are not going to the IMF.”
“The consequences are dire. We are a proud nation. We have the resources. We have the capacity. We are not people of short sight,” he stated emphatically.
Kenya
Meanwhile, the Standard Bank Group Limited said there is a growing concern for Kenya’s debt-service costs, which make up more than a third of forex reserves.
According to the bank, while Kenya is still able to refinance its debt and is considering a $1 billion Eurobond in the first half of the year, political risks linked to the country’s upcoming elections in August have the potential to delay efforts to stop borrowings and close the budget deficit.
The report said East Africa’s largest economy has accumulated debt, including a high concentration of commercial loans, with servicing costs now at 35% of foreign-exchange reserves and 43% of tax revenue.
For Standard Bank, Kenya falls into the same bracket as Ghana from a fiscal perspective, but noted that the main difference between the two countries is an IMF programme that Kenya secured last year.
By Ernest Kofi Adu