Ghanaian economist Julius Gyimah, has explained that the recent increase in our total debt stock is mainly due to the depreciation of the local currency against foreign currencies, particularly the dollar.
The economist said the country’s rising external debt will lead to increased demand for foreign currency for debt repayment and further depreciation of the cedi.
The situation he lamented always puts a strain on the government’s finances, as it will need to raise more revenue to repay the external debt.
The country’s public debt increased by GH¢46.4 billion in the first two months of 2024 to hit GH¢658.6 billion ($53.1 billion).
Data from the Bank of Ghana has revealed that the total public debt stock of the country is equivalent to 62.7% of the gross domestic product (GDP).
According to the Central Bank’s May 2024 Summary of Economic and Financial Data, the debt ended 2023 at GH¢611.2 billion but shot up to GH¢626.0 billion in January 2024 and subsequently to GH¢658.6 billion in February 2024.
Mr. Julius Gyimah, in his explanation, said the increase in the public debt stock was due to the depreciation of the cedi during the period.
He explained that “one way or another, people still have confidence in the economy to invest.” So they buy more Treasury bills and bonds in a market that is now oversubscribed. So, if domestic debt is rising, it signifies that people are donating money to the government to fund development projects in the country.
That is why we must preserve stability in light of the financial market’s trust. When you look at the difference between December 2023 and February 2024, when you look at the incremental jump and make the deductions, you maintain the external debt position, which has remained constant in dollar terms, but the way the cedi has depreciated has had an impact on it.
The overall effect is that our debt has increased, but it is not scary. This is because the government has not gone for any external loans like they do through Euro bonds and others. It is the existing external debts that make up bilateral and multilateral debt; it is what has become more constant.
Speaking on Frontline on Rainbow Radio 87.5FM, the economist said the increase in our debt stock is mainly a result of the weak performance of the cedi against the dollar. We are incurring more debt because the cedi is not performing well. If you convert your debt to the prevailing dollar rate, you should expect an increase in its value. This means that the moment Cedi depreciates, youexpect the value of most of the dollardenominated debts to increase.”
By: Rainbowradioonline.com/Ghana
