Rating agency, Fitch, is projecting an interest cost of more than 45% of revenue for Ghana from now till 2024.

It says government interest costs reached 47.5% of revenue in 2021, considerably above the current ‘B’ median of 10.7%.

“Interest costs largely reflect high yields on domestic debt. Yields have climbed higher in 2022, following inflation spikes and monetary tightening by the Bank of Ghana (BoG)”, it mention.

Furthermore, it said “yields on the 91-day treasury bill reached 26% in July 2022, up from 12.6% in July 2021. Moreover, the government has reported under-subscribed yields, necessitating the tapping of existing medium-term issuance”.

It also said the 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 said, such a measure would necessitate parliamentary approval.

Indeed, yields on T-bills have surpassed 27% and that could increase interest cost further.

Interest payments for first 5 months hit ¢17.84bn

The 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% of the total interest payments.