Interest payments on public loans are estimated to cost the country GH¢10.49 billion next year, equivalent to 36.35 per cent of that year’s total tax revenues.
The 2016 budget statement released on November 13 estimates tax revenues at GH¢28.86 billion. The cost of debt servicing is projected to reach GH¢9.6 billion in 2015 but it is now estimated to end 2016 at GH¢10.49, due to the increasing public debt stock.
This means that for every one cedi to be collected as tax revenues in 2016, more than GH¢0.30 would go into debt servicing, leaving the rest for other expenditures such as capital expenditure (projects and infrastructure financing) and other statutory demands such as transfers to the Ghana Education Trust Fund, and the payment of salaries and wages.
The Finance Minister, Mr Seth Terkper, who presented the budget pegged the total expenditure and arrears at GH¢46.44 billion.
The minister explained that out of the total estimated cost of interest payments, GH¢2.17 billion would be expended on external interests, while GH¢8.31 billion would go into the servicing of domestic loans raised through statutory instruments such as Treasury bills and local bonds.
Containing the costs
Due to the rising debts and the associated interest costs, Mr. Terkper said the government would continue to implement the debt management measures approved by Parliament earlier in the year to help bring down public debts and interest payments.
His comments on the debt and its associated servicing costs were premised on a growth in the national debt stock over the past six years.
Within the period, the country’s debt stock rose from GH¢4.9 billion in 2006 or 26.2 per cent of Gross Domestic Product (GDP) to GH¢76.1 billion or 67.1 per cent of GDP in 2014.
As of September this year, the debt stock had risen to GH¢92.16 billion, equivalent to 69.12 per cent of the period’s GDP.
The figure comprised GH¢54.48 billion for external debt and GH¢37.67 billion for domestic debt.
The running mate of the New Patriotic Party, Dr Mahamadu Bawumia, told the media after the budget presentation in Accra that the interest payments on the country’s debt alone was more than six times the total petroleum revenue.
“When we found oil we were very happy, but the borrowing of the government has compromised the whole oil discovery,” he said.
The 2016 budget projects oil receipts at GH¢2.01 billion. Annual budget funding of oil proceeds for 2015 is estimated at the same amount.
Total expenditure
Total expenditure, including provision made for the clearance of arrears and outstanding commitments in 2016, also increased from an estimate of GH¢41.42 billion in 2015 to GH¢46.45 billion, representing a 16.6 increase within the period.
Of this amount, GH¢2.94 billion, equivalent to 1.9 per cent of GDP and 6.8 per cent of total expenditure, will be used for the clearance of arrears and outstanding commitments, while GH¢14.02 billion will go into the compensation of employees, which comprises wages and salaries, allowances, pensions, gratuities and social security contributions for public sector workers.
Expenditure on goods and services is estimated at GH¢2.54 billion, representing 1.6 per cent of GDP.
Pull quote
The proportion of interest payments as a share of tax revenues means that for every one cedi to be collected as tax revenues in 2016, more than GH¢0.30 would go into debt servicing, leaving the rest for capital expenditure and other statutory demands such as Treasury bills and local bonds.
Containing the costs
Due to the rising debts and the associated interest costs, Mr. Terkper said the government would continue to implement the debt management measures approved by Parliament earlier in the year to help bring down public debts and interest payments.
His comments on the debt and its associated servicing costs were premised on a growth in the national debt stock over the past six years.
Within the period, the country’s debt stock rose from GH¢4.9 billion in 2006 or 26.2 per cent of Gross Domestic Product (GDP) to GH¢76.1 billion or 67.1 per cent of GDP in 2014.
As of September this year, the debt stock had risen to GH¢92.16 billion, equivalent to 69.12 per cent of the period’s GDP.
The figure comprised GH¢54.48 billion for external debt and GH¢37.67 billion for domestic debt.
The running mate of the New Patriotic Party, Dr Mahamadu Bawumia, told the media after the budget presentation in Accra that the interest payments on the country’s debt alone was more than six times the total petroleum revenue.
“When we found oil we were very happy, but the borrowing of the government has compromised the whole oil discovery,” he said.
The 2016 budget projects oil receipts at GH¢2.01 billion. Annual budget funding of oil proceeds for 2015 is estimated at the same amount.
Total expenditure
Total expenditure, including provision made for the clearance of arrears and outstanding commitments in 2016, also increased from an estimate of GH¢41.42 billion in 2015 to GH¢46.45 billion, representing a 16.6 increase within the period.
Of this amount, GH¢2.94 billion, equivalent to 1.9 per cent of GDP and 6.8 per cent of total expenditure, will be used for the clearance of arrears and outstanding commitments, while GH¢14.02 billion will go into the compensation of employees, which comprises wages and salaries, allowances, pensions, gratuities and social security contributions for public sector workers.
Expenditure on goods and services is estimated at GH¢2.54 billion, representing 1.6 per cent of GDP.
Source: Graphic