The Dean, Faculty of Accounting and Finance, University of Professional Studies, Accra (UPSA), and Executive Director, Institute of Economic and Research Policy (IERPP), Prof. Isaac Boadi says government’s debt service burden undermines long-term stability and paints picture of high vulnerability despite the recent rating upgrade by Fitch.
Although the improved credit rating has sparked high optimism about Ghana’s economic progress, the finance expert and academic has offered a sobering perspective on the country’s underlying fiscal health.
According to him, the numbers behind the headlines reveal that Ghana’s economy remains significantly strained and far from out of danger. He says the development must be understood within the context of the country’s high debt-servicing burden and long-term structural imbalances.
Breaking down the numbers, the country’s current interest-revenue ratio, which he explains at the proportion of government revenue used to pay interest on debt, stands at an alarming 26%. This figure is significantly above the average for similarly rated countries.
Prof. Boadi explained that nations with a ‘B’ rating typically have interest-revenue ratios around 13%, while those in the more distressed ‘C’ or ‘D’ categories average about 16%.
“This concern is further intensified when compared to peer countries. While nations rated ‘B’ typically maintain an interest-revenue ratio of 13% and those in the ‘C’ or ‘D’ range average around 16%, Ghana’s 26% is considerably higher. Such a gap portrays Ghana as more fiscally strained than its counterparts. Additionally, this high ratio suggests a dependence on borrowing to fund the budget rather than sustainable revenue generation, pointing to long-term fiscal imbalance,” Prof. Boadi said in his analysis cited by The High Street Journal.
The impact of this, he says is very dire. Such a heavy interest burden not only crowds out spending on essential services but also reinforces dependence on borrowing to fill fiscal gaps, rather than addressing them through sustainable revenue generation and expenditure efficiency.
This comment from the finance expert reveals a critical yet often overlooked dimension of the credit ratings discussion. While Fitch’s decision indicates improving investor confidence in Ghana’s short-to-medium-term prospects, it does not automatically translate into a robust, resilient fiscal position.
Prof. Boadi’s view confirms an earlier comment U.S.-based finance professor, Pat Obi that Ghana is not out of the woods yet since vulnerabilities still exist.
Both analysts are calling on the country to go beyond debt restructuring and focus on structural reforms that expand its domestic revenue base, improve public financial management, and prioritize productive investments over recurrent expenditure.
