RENOWNED ECONOMIC think tank, the Institute for Fiscal Studies (IFS), has cautioned the government about Ghana’s worrying rising public debt which hit about GH¢ 146.2 billion as at end of November 2017.
According to the IFS, though the fiscal management strategy of the new government that came into office in January 2017 aims at restoring fiscal discipline, reversing the fiscal deterioration it inherited and putting the public debt on a downward and sustainable path, current developments do not point to the fact the government is winning the debt stability war.
This is because Ghana’s total public debt continues to grow with serious implications for the economy.
To find a breathing space and turn the tide, the IFS yesterday engaged economic experts and stakeholders to critically analyse the debt situation of the country and find policy recommendations to address the debt albatross for economic growth.
Addressing the forum, Dr Kwabena Duffuor, Founder and President of the IFS, noted that public debt was not a political issue, but a national issue which requires all to come on board to seek solution to.
“Let’s come together as a nation and look at our public debt. Let’s borrow but let’s have value for money,” Dr Duffuor, who is also a former Finance Minister, advised.
He said there was nothing wrong with borrowing, but “if you borrow, you should be able to pay. It’s not the size of the loan, but the ability to pay.”
He warned that it’s Ghana that would be disgraced one day if nothing was done about the current situation.
Ghana’s debt profile
Addressing the packed audience, Prof. Newman Kusi, Executive Director, IFS, revealed in a scholarly paper that Ghana’s debt stock had increased astronomically over the last decade with serious implications for the economy.
“Total public debt stood at GH¢ 4.92 billion in 2000, but by 2003 the debt stock had risen to GH¢ 8.0 billion, representing an increase of 62.6%. At end-2006, Ghana’s debt had dropped to GH¢ 4.90 billion or more than halved, following the reliefs it received from the Highly Indebted Poor Country and the Multi-Lateral Debt Relief Initiative during the period.
“Thereafter, the country’s debt began to rise, reaching GH¢ 9.7 billion in 2008, reflecting the large fiscal deficit recorded in the year and the impact of the cedi depreciation on the external debt. Total public debt continued rising, reaching GH¢ 35.1 billion at end-2012 and by end-2016, the debt stock had jumped to GH¢ 122.6 billion.”
Prof. Kusi added that the debt stock continued to rise, reaching GH¢ 138.9 billion in September 2017.
“Adding the ESLA Plc. GH¢ 4.7 billion bond issued in late October 2017 and the sale of GH¢ 5.3 billion long-term bonds at the end of November 2017, of which nearly half consisted of fresh borrowing, and the other half treasury bills that were restructured into long-term bonds brings the total public debt to about GH¢ 146.2 billion at end-November 2017. Total public debt thus increased by GH¢ 133.9 billion between 2006 and September 2017.”
Moderated by Nicholas Ekow de-Heer, head of programmes, IFS, the discussants – Prof. Kwasi Prempeh, Executive Director, Center for Democratic Development; Dr Johnson Asiamah, a former Second Deputy Governor of Bank of Ghana; Dr Mark Assibey-Yeboah, chairman, Finance Committee of Parliament; and Isaac Adongo, Member, Finance Committee of Parliament, gave varied opinions about Ghana’s increasing debt situation and suggested ways of containing it.
Some of the major issues that came up were the need to increase revenue mobilisation, political incentive favouring borrowing rather than revenue mobilisation, interest rate hedging, elaborate risk management framework, public debt audit, corruption and debt conference.
The chairman for the occasion was Most Rev. Prof. Emmanuel Asante, President of National Peace Council and former Presiding Bishop of Methodist Church, Ghana.
Below is the paper – ‘Growing Ghana’s Public Debt and its Implications for the Economy’-presented by Prof. Newman Kusi: