The overall objective of Government debt management policy is to meet the central government’s financing requirement at minimal borrowing costs with a prudent degree of risk. It also aims at facilitating the government’s access to the financial market as well as supporting development of a well-functioning domestic financial market.
Ghana’s total public debt stock which stood at US$9,303.7 million increased steadily to US$22,737 million as at end August, 2013. Out of this, total external debt amounted to USD 10,167 million, (i.e. 44.72 per cent) and domestic debt was USD 12,569.83 million, representing 55.28 per cent of the debt stock.
As a percentage of GDP, total debt stood at 36.9% as at end December 2009, up from 32.3% on December 31, 2008. This increased to 49.25% of GDP by end December 2012. However, in January 2013, there was a slight reduction in this ratio to 42.3%. Thereafter, there has been a slight increase to 49.44% in August 2013.
EXTERNAL DEBT STOCK
Ghana’s external debt stock, comprising public and publicly guaranteed debt as at end August 2013 stood at US$10,167.13 million as against US$5,007.9 million in December 2009.
As at end August 2013, multilateral debt stood at US$4,177.39 million representing 20.91 per cent of the total debt stock. Other concessional facilities amounted to US$1,453.5 million, (7.66 per cent), Export credits was US$1,059.68 (5.31 per cent), Commercial debt US$1,074.65 (5.38 per cent), Bilateral facilities were US$867.39 million (4.34 per cent), and International capital market bonds were US$1,530.51 million (7.66 per cent).
DOMESTIC DEBT STOCK
The domestic debt stock stood at US$12,569.83 million at the end of August 2013. Of this amount, 27.5 per cent was in short-term instruments (instruments with maturities of 1 year and below), 48.72 per cent in medium-term instruments, and 21.6 per cent in long-term instruments, while standard term loan (usually with commercial banks) constituted 2.18 per cent.
RISKS ASSOCIATED WITH THE DEBT STRUCTURE
Risk management is the process of identifying the level of risk that an entity wants to incur, measuring the level of risk that an entity currently faces, taking actions that bring the actual level of risk to the desired level and monitoring the new level of risk so that it continues to be aligned with the desired level. Process is continuous and may require alterations in any of these activities to reflect new policies, preferences and information.
Sound debt management practices stress the importance of analysing and monitoring the risks inherent in the structure of public debt as well as mitigating them, while taking into account the costs of doing so. In the trade-off between expected costs and risks, very often cost-minimisation is given priority over risk-mitigation in public debt management. However, an excessive focus on cost savings at the expense of risk reduction can have serious consequences for an economy and potentially lead to crises.
Debt Sustainability Ratios
Ghana’s solvency ratios through the year to date show that the nation’s debt is sustainable with a moderate degree of debt distress. As shown in Table below, total public debt-to GDP ratio was estimated at 49.44 per cent as at end August 2013, of which total external debt/GDP was 22.11 per cent, while total domestic debt was 27.33 per cent.