In recent years, Ghana has implemented various measures to manage its domestic debt and promote fiscal stability. One such initiative is the Domestic Debt Exchange Programme (DDEP), which aims to reduce the cost of servicing debt and improve overall economic performance. While debt management is essential, it is equally crucial for the government to ensure that the savings generated from DDEP are put to productive use.
Given this, Professor Godfred Alufar Bokpin, an Economist, has asked the government to ensure that the GHS61 billion savings from the Domestic Debt Exchange Programme (DDEP) are put to productive use.
“Even though the government is counting its gains in fiscal savings from the DDEP, which is over GHS61bn, that has cost to domestic creditors. Because we couldn’t come under a Domestic Creditors Committee to demand specific reforms in exchange for the haircut, the government has a fiscal space of over GHS61bn.”
Professor Godfred Alufar Bokpin
The primary objective of the DDEP is to restructure the country’s existing domestic debt by substituting high-cost short-term debt with longer-term debt at lower interest rates. By reducing the cost of servicing debt, the government can allocate more resources to productive sectors such as infrastructure development, education, healthcare, and job creation.
According to Prof. Bokpin, the government was expected to save GHS61 billion from the DDEP it carried out under the ongoing US$3 billion loan-support programme with the International Monetary Fund between 2023 and 2031.
The Economist said the money would give the government a “breathing fiscal space” and that it was important that intentional efforts were made to invest such an amount in the growth of agriculture, agribusiness and manufacturing.
Agriculture remains a vital sector in Ghana’s economy, employing a significant portion of the population and contributing to food security. Allocating funds from the DDEP towards agricultural development programs, modernizing farming techniques, improving irrigation systems, and enhancing access to credit for smallholder farmers will boost agricultural productivity and reduce rural poverty.
Prof Bokpin, also said that it was important for the government to make the cost of doing business in those sectors very friendly.
SMEs are crucial in job creation, innovation, and economic diversification. However, access to finance remains a challenge for many SMEs in Ghana. The government can utilize the savings from the DDEP to establish a dedicated fund that provides affordable and accessible financing to SMEs.
Additionally, offering training, mentorship, and business development services will enhance the capabilities and competitiveness of SMEs, driving economic growth.
Ghana’s infrastructure deficit remains a major impediment to economic growth. The government should prioritize allocating a significant portion of the savings from the DDEP towards infrastructure development.
Investing in transportation networks, power generation, water supply systems, and digital infrastructure will improve connectivity, attract investment, and enhance productivity across various sectors.
Harnessing the Power of DDEP
Prof Bokpin noted that in the past, the Heavily Independent Poor Countries (HIPC) initiative, and other debt relief programmes, had the country implement specific programmes and projects.
In the case of the DDEP, however, he said that had not been done, giving the government a leeway to spend the money realized through the DDEP the way it wanted to do.
He also encouraged the government to double its efforts in completing external debt negotiations, because it was critical in ensuring that the country reached the debt sustainability expected by 2028.
Ghana has so far completed its domestic debt restructuring and secured assurances from its external bilateral creditors, awaiting a Memorandum of Understanding (MoU), and is still in negotiation with its commercial creditors.
“The government must be flexible and do a lot more within to ensure that we deepen fiscal reforms, So that whatever gains we make will be able to complement what we must do here.”
Professor Godfred Alufar Bokpin
The Domestic Debt Exchange Programme presents an opportunity for Ghana’s government to reduce debt servicing costs and redirect savings towards productive sectors. By allocating funds to infrastructure development, education, agriculture, and SME support, the government can stimulate economic growth, create jobs, and improve the standard of living for Ghanaians.
However, the government must establish robust monitoring mechanisms to ensure the efficient and transparent utilization of the savings from the DDEP. Through prudent and strategic allocation, Ghana can harness the potential of the DDEP to drive productivity and propel the nation towards sustainable development.
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