Ghana’s debt stock has ballooned to some GHc122bn according to figures available at the Finance Ministry. In his 2017 budget and economic statement presentation to parliament, Finance Minister, Ken Ofori Atta, said the total public debt stock as at the end of 2016 stood at 73.3 percent of Gross Domestic Product (GDP) up from 71.63 percent in 2015. Total projected expenditure for 2016 was GHc 43.9bn (26 percent of GDP) but actual expenditure amounted to GHc 50.3bn (30.2 percent of GDP). Domestic and external debt stock stood at 32.02 percent of GDP and 41.29 percent, respectively.
Ghana like any other country has debts. But is Ghana’s debt to GDP ratio too high or it doesn’t matter? It does not really matter as long as the nation is producing enough to pay its debt. At the 3rd BTA/Gold Coast Business Summit, speakers Prof. Godfred Bokpin and Kwame Asomaning, CEO of Gold Coast Financial Holdings took divergent positions but all agreed that the way forward is for Ghana to grow its economy.
Ghana’s Debt In Perspective- What’s the Way Forward
Kwame in his presentation pointed out that government can always print money to pay off its domestic debts therefore it’s not an issue but should have a good management system to hold the excesses. There are a lot of opportunities internally to make Ghana work better and produce more to develop the economy.
Agriculture has always been touted as having the potential to transform Ghana’s economy but little has been done aside the talk. GDP from agriculture in Ghana increased to GHc73.65bn in 2015 from GHc73.62bn in 2014. GDP from agriculture averaged GHc63.96bn from 2006 until 2015, reaching an all-time high of GHc73.65bn in 2015 and a record low of GHc53.22bn in 2007. About 30 percent of post-harvest losses are as a result of bad road networks leading to the farm-gates hampering the transportation of produce to the market. So for example, government should invest in road infrastructure to these farm-gates to improve productivity in the sector. Excess produce could be exported to boost our foreign exchange earnings.
Another development which makes the debt stock a concern is the fiscal indiscipline which could largely be attributed to corruption and diversion of funds. The debt then becomes a real burden to the nation because they are not used for what they are intended for but the nation ends up paying with interest anyway. Considering the developmental need in infrastructure, health, education, manufacturing, agriculture, jobs, etc. there should be nothing wrong with even increasing the debt stock. Because the developmental needs in infrastructure provides the needed platform for further investments which could be financed by more borrowing. A country in this position is starving if government employs austerity measures by cutting borrowing and therefore spending. Therefore, the level of borrowing is not injurious as its misappropriation. It is also noted that, the domestic component of the debt which top global economists believe that government can always print money to redeem. Kwame Asomaning added that government can always print more money to finance their activities as long as there are effective management systems in place to check the excess. However, we should shy away from foreign debt because we do not control the dollar.
What would be this government’s strategy? Is it to print more money to reduce local debt or fund infrastructure, is it to borrow more or cut spending? How does this aim to tackle fiscal indiscipline? We believe that the success to grow the economy is for the government to well balance all the options available to them.
Author: Yaw Korankyi Antwi