The pandemic has presented a good opportunity for Ghana to ask for debt relief from the International Monetary Fund (IMF) and the World Bank according to the head of financial advisory at Deloitte Ghana, Mr. Yaw Lartey.
Aside from the many programs being introduced by the government to help recover and sustain the economy, he believes there are many justifications for the country to get its debt relief similar to what was given in the year 2001 which benefited the country.
“If we use the pandemic as a situation to make a strong case to our development partners to do some debt cancellation, we will get a lot of relief. I mean there’s a lot of justification for that, I mean the pandemic has started and government should strongly push it and join other developing countries to push that … strongly because we have enough justification to do it.
Yaw Lartey
“Our debt stock is not sustainable… and the way to do it is to have some relief. So if we get some debt cancellation, particularly our interest commitment”.
Mr. Lartey asserted that interest would reduce drastically once we resort to some relief packages from IMF.
“We borrow to pay loans that we have already contracted. This is not sustainable and so the way to it, is to have some reliefs so that interest components reduces significantly…. if you do that your debt to GDP ratio reduces”.
Also on the point on borrowing, he said Ghana will not be the first country to go to the IMF as there are reminiscent instance of other countries going for aid, but stressed on the need for prudence in borrowing.
“We are in a pandemic situation and therefore as you see with a lot of other countries, over eighty countries, have applied to the IMF for support and so we are not an exception, we are part of the lot”.
“But I think we’ll go back to the age old mantra that it has to be a smart borrowing. We should borrow the money and invest them in self-financing project that reduces the debt to GDP ratio. “Because if you invest in tangible projects, those tangible projects increases the value of your GDP, and therefore, your debt to GDP increases even though you’re still borrowing”.
“And so we should take advantage of the pandemic also apply for the debt relief from international partners. I think one of the benefits we got, right about the year 2000-2001 was when we opted for the HIPC and it helped us because it gave government a lot of relief to invest in other projects”.
Despite his optimism over government stringent crackdown of tax offenders, Mr. Lartey was particularly insistent on government reviving the property rate tax, which to him remains a viable option for internal revenue generation.
“Government is still enforcing harder laws and prosecuting tax offenders, and trying to bring a lot more people into the tax net which I think is a very good policy, I think government should still focus on that”.
“Because our ability to raise these internal revenue, I think we still have the ability to do that but for one or two reasons, we have not been able to. A very good example is property rates. There are people who are living in luxurious home who have never paid property rates and those properties are identifiable”.
