New Telegraph

Fitch: Ghana’s interest cost to exceed 45% of revenue till 2024

Rating agency, Fitch Ratings has projected an interest cost of over 45 per cent of revenue for Ghana from now till 2024. In a report released at the weekend, the agency said the Ghanian government’s interest costs reached 47.5 per cent of revenue in 2021, considerably above the current ‘B’ median of 10.7 per cent.

“Interest costs largely reflect  strathigh yields on domestic debt. Yields have climbed higher in 2022, following inflation spikes and monetary tightening by the Bank of Ghana (BoG),” Fitch said. Furthermore, it said: “Yields on the 91-day treasury bill reached 26 per cent in July 2022, up from 12.6 per cent in July 2021.

 

Moreover, the government has reported under-subscribed yields, necessitating the tapping of existing medium-term issuance.” It also said government has increased its outstanding advances with the Bank of Ghana, providing some additional domestic financing and could conduct another private debt placement with the Central Bank as it did in 2020.

 

However, the rating agency noted that such a measure would necessitate parliamentary approval. Indeed, yields on T-bills have surpassed 27 per cent and that could increase interest cost further.

 

Interest payments for first five months hit ¢17.84 billion Government, in the first five months of this year, spent ¢17.84 billion to service interest and amortisation on debt, the Bank of Ghana indicated in its July 2022 Monetary Policy Report. This was higher than the envisioned target of ¢16.54 billion. Domestic interest payments as of May 2022 accounted for 76.7 per cent of the total interest payments

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