Dr. Said Boakye, an Economist and Senior Research Fellow at the Institute of Fiscal Studies has backed calls from a section of Ghanaians for the need to seek debt relief to limit the mounting pressures on the country’s rising debt stock and interest payments.
According to him, the future of the country’s fiscal stance looks bleak and as such, government should consider seeking debt relief to salvage the situation.
“Of course, if there is debt relief available, they [government] should go for it. They only have to be mindful of some of the conditionalities and others. Where the country has reached, the country really needs debt relief if they are available. Where the finances are, is not palatable. If the country does not take care the future will be very bleak”.
Dr.Boakye
Speaking with The Vaultz News, Dr.Boakye indicated that the country’s debt which currently stands at GHȼ 334.56 billion at End-June 2021, will continue to rise since revenue mobilization has been low coupled with rising expenditures occasioned by COVID-19-induced expenditures. As a result, the Senior Research Fellow urged the government to dialogue with the opposition to look at how best to handle the challenges confronting the country.
“Given expenditure rigidity and tax revenue not performing, debt is going to increase. Except they [government] sit down and come to reality and begin to work with opposition. I believe they have to sit together; both politicians in government [and] politicians in opposition.
“It can happen that when the opposition sees that increasing wages is going to hurt the economy because monies are not going so much into government coffers, opposition will just say go ahead and demand; that’s not the right thing to do. But the initiative will have to come from government to sit down the opposition on how to manage the economy”.
Dr.Boakye
Too early to seek debt relief
On the contrary, a Chartered Economist with the Institute of Chartered Economists of Ghana (ICEG) and Lecturer at the Central University College, Mr. Kofi Korle, thinks the country’s rising debt is not as scary as it’s been portrayed. According to him, Ghana need not seek debt relief since the rising debt level is just temporary and will reduce once the virus is contained.
“I think it’s not an issue that has to be so critical for us to seek debt relief at the moment. Our economy has gone through some challenges solely due to the COVID which is a global phenomenon affecting every country. And the debt to GDP ratio as at now is mainly being influenced by the growth level of the economy.
“Due to the COVID, the growth did not pick up as expected. So it’s kind of an artificial reflection of the true performance of the economy. Now that the economy is gradually picking up, let’s go through this year and see the position of the debt to GDP ratio; then, we will make a decision whether to go for an IMF bailout or not”.
Mr. Korle
Meanwhile, Mr. Korle told The Vaultz News that he is hopeful things will soon turn around for the country but urged the government to continue to support businesses through its stimulus packages to open up the economy to ensure a faster recovery.
“I believe we will make a turn around. So we shouldn’t rush as at now to go in for any relief package. The productive incentives that government is putting in place is a good thing to revive businesses and provide the necessary environment for businesses to have the confidence in the economy. It’s a global shock but we are doing well; so, let’s be hopeful”.
Mr. Korle
Current debt levels
Ghana’s rising debt levels continue to be a topical issue featuring in almost every debate concerning the future direction of economic policy and availability of resources to undertake vital programs and interventions in the country’s recovery process. Currently, Ghana’s gross public debt stands at GHȼ 334.56 billion representing 77.1% of GDP as of End-June 2021.
Meanwhile, government targets a deficit of GH¢41,273 million (9.4% of GDP) for the 2021 fiscal year but promises to return it to 5.0% by 2024. Despite the rising debt levels, the IMF believes Ghana has the capacity to service its debts but some economists think otherwise.
Nevertheless, the decision to either go for debt relief or not remains the prerogative of the government, taking into consideration its likely effect on the economy. Economist Economist Economist Economist
READ ALSO: Debt servicing: Ghana in serious trouble – Dr. Boakye
