The Assistant Director at the IMF‘s Fiscal Affairs Department has revealed that for every 1 cedi of tax revenue collected by government, 40% of it goes to settle interest of the country’s debt.
Catherine Pattillo says the development calls for some drastic measures to try and control the debt situation in Ghana.
She told JoyBusiness the savings made from this could then help government channel these funds on very important infrastructure projects as well as social projects, adding that “ if you reduce debts, obviously, that move would help direct the funds to other crucial areas.”
Madam Pattillo believes that the government should explore some expenditure cuts, especially in nonessential areas to help with the situation as well as improving upon tax compliance measures and widening the tax net to help the situation.
She also disclosed that there is some sought of arrangement with the government on some measures over the next five years that would help anchor debts on a sustainable path.
Ghana’s debt position and interest payments
According to a recent Bank of Ghana financial and economic data, Ghana’s total debt stock ending July this year stood GH¢205 billion. The 2019 budget also puts the country’s interest payments at GH¢18. 6 billion.
A further breakdown of government’s expenditure based on the budget shows that it plans setting aside some GH¢22 .8 billion as total compensation for public sector workers.
Grants to others will be about GH¢13.7 billion, when it comes to capital expenditure, the government is hoping to spend about GH¢8.5 billion by the end of December 2019.
Government on the rising debt and interest payments
Finance Minister Ken Ofori-Atta had in previous interviews with JoyBusiness noted that government is committed to improving the country’s high debt position.
Mr Ofori-Atta has maintained that some of the measures that they are instituting, which includes debt profiling as well channelling some of these borrowed funds into self-financing projects can also deal with the issue.
He also believes that the government's commitment to fiscal discipline would soon result in the country’s debt reducing substantially.