Government debt interest payments are continuing to rise, showing the government’s expanding appetite for borrowing. As a result, the country has been forced to use a portion of its resources to service its debt over time.
According to data from the Finance Ministry, total interest payments between 2016 and 2020 totaled GH84.52 billion. This sum accounts for 36.6 percent of the country’s total revenue of GH230.92 billion for the last five years, including grants.
The country’s debt payment commitments were already concerning before to the start of the epidemic, but they became even more so as more resources were required to meet pandemic-related costs since last year. Since a result, the government is under pressure to expand borrowing as revenue mobilization remains low.
As a result, it’s not unexpected that in 2020, the government paid the highest interest rate on debt in the previous five years. According to data from the Ministry of Finance, overall interest payments totaled GH24.60 billion last year, accounting for 44.6 percent of the country’s total income and grants of GH55.1 billion.
Interest on loans cost the government GH10.77 billion in 2016. In 2017, this increased by GH2.8 billion to GH13.6 billion, a 26.0 percent increase year on year. It grew to GH15.82 billion in 2018, a GH2.25 billion increase over the previous year’s payment. In 2019, it increased to GH19.76 billion, an increase of 24.87 percent over the amount paid in 2018.
Interest payment expenses amounted to GH24.87 billion in the period between 2019 and 2020. Over the last five years, interest payments have increased by GH13.83 billion.
Revenue Growth Is Slowing
A closer examination of the data found a concerning pattern, indicating that if income growth remains low, the country will likely spend more than half of its revenues on debt interest. During the review period, it was observed that, while interest payments have been steadily increasing, growth in the country’s income has been slowing, even though revenues are increasing nominally.
Total income, including grants, was GH52.97 billion in 2019. This was an increase of GH5.34 billion, or 11.20 percent, above the revenue obtained in 2018. In 2020, total revenues and grants increased by 4.07 percent, or GH2.16 billion, the lowest growth rate in the previous five years. This indicates that the country’s ability to raise income is eroding with time.