The recent depreciation of the Cedi against major international currencies, especially the dollar, has added GH¢15.3billion to the country’s external debt stock, the Minority has said.
The development, according to the Minority, means that Ghana’s external debt stock as at November 2018 will be translated at the current exchange rate into GH¢101.3 billion.
This was revealed Wednesday at a forum dubbed ‘An Encounter with the Minority on the State of Ghana’s Economy’.
The Cedi until Thursday, March 14 had fallen deeply against international currencies especially the dollar, by some 5 per cent trading at around GH¢5.90.
It has, however, begun to record some marginal appreciation against the dollar closing at around GH¢5.56 against the dollar on March 15, 2019—a development which is largely due to the injection of dollar cash by the Bank of Ghana last week.
The forum was addressed largely by Minority spokesperson on economic matters who doubles as former deputy finance minister Ato Forson.
Delivering his address from a prepared text, Mr Forson said the depreciation of the Cedi is expected to add up to public debt recorded in cedis due to increases in the cost of debt service on Dollar denominated debt.
“Making reference to the 2019 budget, all fiscal and financial estimates were made using a projected Cedi/Dollar exchange of GH¢4.8 per Dollar. Currently, the Cedi/Dollar exchange is quoted at GH¢5.65 per Dollar. The implication is that all government loans that were expected to be serviced at the projected exchange rate of GH¢4.8 have suddenly become more expensive,” he said.
“The stock of total public debt,” he continued “has gone up significantly at the current cedi-dollar exchange rate of 5.65. In November 2018, the stock of total external debt as reported by the Bank of Ghana was US$18.014 billion.
“At the then exchange rate of GH¢4.8 per dollar, the total external debt in local currency was GH¢86.4 billion. Even if the government has not added anything to the stock of external debt over the last three months, which we all know is not possible, the US$18.0 billion external debt recorded in November 2018 will be translated at the current exchange rate into GH¢101.3 billion.
“This means that without considering new borrowings by government, the depreciation alone has added GH¢15.3 billion to Ghana’s external debt.”
In November 2018, the public debt stood at GH¢172.9 billion. It has however ballooned to GH¢201.8billion following additions Gh¢15.3billion by the depreciation of the cedi and the issuance of GH¢13.6billion bond to clean the banking system.
“This means that in barely 2 years, the NPP government has added about GH¢80 billion to the public debt stock,” he said.
He further noted that the rapidly depreciating exchange rate cannot be said to be accompanied by 9.2 percent inflation rate asking: “How can an economy be externally unstable and internally stable?”
The depreciation of the Cedi, he said is expected to build inflation pressures because it feeds into fuel prices, energy cost, transport cost, utility prices, cost of import duties and imported food prices.
“The exchange rate pressures alone is expected to push the inflation rate to about 12 percent on average according to the HSBC global research. Therefore, the inflation target of 8±2 cannot be achieved going into 2019 and beyond,” he stated.