International Monetary Fund (IMF) has warned Ghana’s government that the country’s growth could be stifled because of the rising public debt.
This was one of the key issues raised by the IMF mission led by Christina Daseking to conduct discussions for the 2013 Article IV consultations on Friday 12th April, 2013.
According to the IMF, Ghana government’s excessive domestic borrowing is also raising the cost of credit to the private sector, a key growth constraint in Ghana.
Average interest rates in Ghana ranges between 21 to 24 percent which key advocates like the Private Enterprises Federation (PEF), Association of Ghana Industries (AGI) among others have complained about over the years.
Ghana’s total public debt, at the end of December 2012, stood at $18,832.77 million, equivalent to 49.4% of Gross Domestic Product (GDP) and this is up from $15,350.08 million.
The IMF also cautioned that the ballooning wage bill, if untamed, would bring debt to levels that could endanger the government’s transformation agenda. This is largely because of a new pay policy in Ghana (Single Spine Salary Structure), which has put enormous pressure on the public purse. All the public sector workers have been migrated onto the new pay policy and salary levels have gone as a result.
In 2012, the wage bill rose by 47 percent.
The mission urged government to gain control over the wage bill. It recommended a thorough audit of the 2012 payroll and welcomes that the government has already started this process.
The IMF mission projects a reduction in the fiscal deficit to 10 percent of GDP this year, about 1 percent higher than the budget projections, assuming a delayed adjustment in utility tariffs.
