Graphiques de la semaine

A worrying trend in the public finances

CHART OF THE WEEK  
2
3 September 2020  
GHANA: A WORRYING TREND IN THE PUBLIC FINANCES  
Stéphane Alby  
PUBLIC FINANCE INDICATORS (% OF GDP)  
Budget balance (LHS inverted scale)  
Public debt  
-
-
-
14  
12  
10  
80  
70  
60  
50  
40  
30  
20  
10  
-
-
-
-
8
6
4
2
0
2
010  
2011  
2012  
2013  
2014  
2015  
2016  
2017  
2018  
2019 2020f 2021f  
Source: MoF, BNP Paribas  
According to the government, the Covid-19 crisis will push the budget deficit up to 11.4% of GDP this year, from the 4.7% initially expected.  
More importantly, medium-term forecasts do not predict a return of the deficit to below 5% of GDP before 2024. This is a worrying trend.  
Covering financing requirements will prove to be challenging. With the bulk of external financing having already materialized, the government  
will have to turn to the local debt market. However, conditions here are onerous, resulting in interest costs rising to a very high level (50% of  
government revenue in 2020). Another option would be to make use of monetary financing. The central bank already has an asset purchase  
programme in place (2.6% of GDP). Increasing this would carry risks for a country vulnerable to portfolio investment flows. Additional  
uncertainty comes in the form of the general elections to be held at the end of 2020. In the event of a loss of confidence, the cedi could come  
under renewed pressure, weakening the public finances a little more. Around half of debt is denominated in foreign currency. We estimate  
that debt will climb to 77.5% of GDP in 2021, from 62.4% in 2019.  
stephane.alby@bnpparibas.com  
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