Ghana’s public debt continues to rise sharply as it hit GH¢19.027 billion at the end of March 2011 compared to GH¢17.2 billion recorded in December 2010.
This excludes the controversial STX deal which would cost the country $1.5 billion and other loans that the government is seeking.
The total debt stock is equivalent to about 40 percent of the country’s Gross Domestic Product (GDP) or the total value of goods and services.
Some economists, including the renowned Dr. Joe Abbey has described the trend as alarming, saying it could harm the nation in the long-term since it might not have the capacity to service or pay the debt.
Total outstanding external debt stock at the end of March 2011 was provisionally estimated at $6.333 billion or GH¢9.500 billion (17.88 percent of GDP), an increase of $214.99 million from the level of $6.118 billion in December 2010.
Domestic debt at the end of March 2011 was however GH¢9.526 billion (17.84 percent of GDP), GH¢1.246 billion higher than December 2010 stock of GH¢8.3 billion.
The substantial increase in the domestic debt is mainly due to the issuance of bonds by the government to settle arrears, especially those of contractors.
In recent times, government issued a three-year bond, which has a yield-to-maturity of 12.39 percent for investors.
Meanwhile, for the first time in four meetings, the Prime Rate-the rate at which commercial banks borrow from the Central Bank, has been reduced by a 50 basis points to 13 percent.
This means that interest charge on bank loans would go down accordingly but the margin of decline will depend on the individual banks.
Prior to the assessment of developments in the economy by the Monetary Policy Committee (MPC) of the Bank of Ghana (MPC) Friday, some financial intermediaries have started reducing their base lending rates to conform to the inflationary trends.
Business Confidence in the economy, according to the MPC, has improved marginally due to positive assessments of economic prospects, expectations of future price trends and declining interest rates, the Bank of Ghana has said.
At the same time, economic activity picked up at a higher pace than a year ago though there was a downside risk to output which is the decline in real credit to the private sector.
However, consumer confidence dipped, mainly attributed to concerns about global commodity prices and the possibility of future fuel price hikes.
On government fiscal operations, provisional data during the first quarter of 2011 indicated a strong revenue performance.
However, the increase in revenue was matched by an equally strong increase in expenditure.
Fiscal operations during the first quarter resulted in a narrow deficit of GH¢819.2 million, 1.5 percent of GDP, compared to a deficit of GH¢621.4 million for the same period last year.
Source: Daily Guide
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