Dr Charles GyamfiOfori
The Africa Centre for Energy Policy (ACEP) says the country’s successful International Monetary Fund (IMF) deal may restore confidence in the economy and ensure macro-economic stability in the short term.
It however, believes that the bailout from the Fund cannot be a panacea to the underlying fiscal indiscipline that has characterised Ghana’s public financial management.
ACEP has, therefore, recommended that the country should align its expenditure with its revenue to reduce deficit spending.
According to ACEP, the country’s 17thappearance at the IMF, calls for apolitical conversations on the drivers of Ghana’s debt and the way forward towards debt sustainability and averting an 18th IMF programme.
Given this context, ACEP conducted a study that identified and analysed the primary drivers of Ghana’s debt and proposed long-term solutions aimed at preventing a repetitive cycle of relying on IMF assistance.
This was revealed at a town hall meeting organised by ACEP for some selected journalists in Takoradi to share the findings of the study to improve public understanding of the state and drivers of Ghana’s current debt situation to enhance advocacy for reforms.
The programme also sought to increase media, and by extension, public understanding of the primary causes of Ghana’s current debt and the required fiscal measures necessary to engender long-term debt sustainability.
Dr. Charles GyamfiOfori, Policy Lead, Climate Change and Energy Transition at ACEP, said the increasing public debt has resulted in substantial interest payments, which have consumed a significant portion of Ghana’s domestic revenues.
He said relying merely on gross domestic product (GDP) as a benchmark was insufficient, particularly when the disparity between expenditure and revenue widened from 21 per cent in 2018 to 52 per cent in 2021.
He noted that government therefore had to implement various tax policies to improve domestic revenue mobilisation and insulate the economy against debt distress.
He added that government also introduced expenditure-cutting measures, including cutting salaries for ministers and heads of State owned Enterprises (SOEs) by 30 per cent.
However, these measures, he noted, proved ineffective in achieving economic sustainability and maintaining the government’s resolve not to return to the International Monetary Fund (IMF).
“Government therefore had to seek a $3 billion financial bailout from the IMF, marking the 17th time the country sought assistance from the Bretton Woods institution,” he added.
He noted that to help break the cycle of IMF support, government must among other things, establish mechanisms to assess the capacity of projects to deliver value that facilitates loan repayment.
From Emmanuel Opoku, Takoradi