President of the World Bank, Mr. David Malpass has reportedly reproached the Akufo Addo administration for its insatiable appetite for ramping up public debt through loans, saying it will hurt Ghana’s future.
David Malpass advised the government to rather focus on reducing its debt burden which is currently at the unsustainable level of 78% of Gross Domestic Product (GDP). Malpass issued his caution during a recent virtual media roundtable in Accra.
“Holding down the non-concessional debt means higher interest rate debt because that burdens the further generations,” Malpass warned.
The call comes at a time Ghana has been classified as a country in high risk of debt distress by the World Bank.
Ghana’s Debt hit ¢291 billion in 2020 representing 76.1% of GDP. It has also been estimated that by end of 2021 Ghana’s debt to GDP ratio will hit 81%.
President Akufo Addo recently called for debt cancellation for some African countries at a meeting in Paris. Analysts have however said the call was miscalculated because it appeared to be targeted at members of the Paris Club who only have some 6% of the country’s debt.
According to JoyNews, in response to some of these proposals, the World Bank President talked about some initiatives that it supports including a G20 Debt Service Suspension Initiative—or DSSI—which has provided fiscal space to countries to cope with the impact of the COVID-19 pandemic.
Sixteen countries from West and Central Africa have requested to participate in the DSSI as of April 2021.
The World Bank President is quoted as saying that a “permanent solution is necessary to reduce the stock of debt in the poorest countries. The World Bank and IMF are closely coordinating to support the G20 in implementing the G20’s Common Framework for debt reduction.”
The Akufo Addo administration has acquired more public debts than all previous governments combined.
The Government has issued Eurobonds of over US$ 11 billion in four years and it is already planning on floating another US$5 billion by this year.
A few days ago, the government acquired US$ 170 million from the European Union to set up a “Development Bank”, but critics have questioned the rationale for such a loan when the government had already blown some US$ 4 billion in its infamous banking sector cleanup.
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