Former Finance Minister Seth Terkper has announced that the next National Democratic Congress (NDC) administration will prioritize robust economic management to restore Ghana’s credibility in the international capital markets.
With a clear focus on fiscal discipline and debt management, Terkper’s strategy is designed to address the challenges that have plagued the country’s economy, particularly its significant debt burden.
Ghana, once a reliable player in the international capital markets since 2007, was forced to exit in 2023 due to its failure to meet debt obligations. This marked a significant blow to the country’s financial standing, limiting its ability to access much-needed capital to support development projects and economic growth.
The exit from the international markets was precipitated by mounting debt levels and an inability to service these obligations. The situation led to a comprehensive debt restructuring program undertaken by the current government, which involved nearly $20 billion in external liabilities. This debt exchange was aimed at providing fiscal relief, including anticipated savings of $4.4 billion in debt service costs and the cancellation of $4.7 billion over the course of the International Monetary Fund (IMF) program.
Terkper’s Plan for Economic Recovery
Seth Terkper’s approach to economic recovery centers on the reintroduction of the sinking fund, a financial tool he had previously implemented during his tenure as Finance Minister. The sinking fund, designed to manage Ghana’s debt by setting aside resources for debt repayment, was depleted after a $250 million drawdown by the current government to combat the economic impacts of the COVID-19 pandemic.
Mr Terkper argues that the failure to maintain the sinking fund contributed significantly to the current debt crisis. “We shouldn’t have been in the current position we are now in terms of our debt stock, because we set up a sinking fund so that when we go to borrow from the market, we use it to repay,” Terkper stated.
Mr Terkper emphasized that the NDC would revive the sinking fund as a key measure to manage the country’s debt, citing its previous success under his administration. “So we will bring back the sinking fund when we come back to office, and it will be one of the solutions to managing our debt stock and we know from our experience that it worked,” he added.
As of July 31, 2024, Ghana’s public debt had reached GHS 761.1 billion ($51.1 billion), a sharp increase from GHS 587.7 billion ($53.5 billion) earlier in the year, according to current Finance Minister Dr. Mohammed Amin Adam. This surge in debt has been largely attributed to the depreciation of the local currency. Ghana’s external debt stood at GHS 452.0 billion, representing 43.0% of GDP, while domestic debt amounted to GHS 290.0 billion, or 27.6% of GDP.
Mahama’s Vision for Economic Reform
In addition to Terkper’s focus on debt management, former President and NDC presidential candidate John Mahama has outlined a broader economic reform agenda aimed at stimulating business growth and boosting foreign direct investment (FDI) in Ghana. Mahama’s proposals include comprehensive policy interventions designed to foster a conducive business environment and tackle specific challenges that impede efficient operations in the country.
Central to Mahama’s strategy is the establishment of a strong economic framework to attract and sustain foreign investment, which he views as critical to rescuing Ghana from its current economic difficulties. He emphasized the necessity of providing targeted incentives to foreign investors, aimed at quickly bridging the nation’s investment deficits.
The reintroduction of the sinking fund and the broader economic reform agenda proposed by Mahama and Terkper are seen as vital steps toward restoring Ghana’s fiscal sustainability and stabilizing the economy. By focusing on these key areas, the NDC aims to make Ghana attractive to international investors once again and re-enter the international capital markets.
The challenge of managing Ghana’s burgeoning debt and restoring credibility in the international capital markets is a daunting one, but Mr Terkper and the NDC believe that their track record and proposed policies provide a clear path forward. The reintroduction of the sinking fund, in particular, is seen as a critical tool for ensuring consistent debt repayments and preventing further escalation of the nation’s debt stock.
As Ghana steers its way through these economic challenges, the focus will remain on creating a stable and conducive environment for both domestic and foreign investors. The next NDC administration, if elected, will have the task of implementing these strategies to bring about the economic recovery that the country so desperately needs.
In the end, the success of these efforts will hinge on the government’s ability to maintain fiscal discipline, manage debt effectively, and build investor confidence. With the right policies and a commitment to robust economic management, Ghana can once again become a reliable player in the international capital markets and set the stage for sustainable growth and development.
READ ALSO: Bank of Ghana Cracks Down on Illegal Lending Apps Exploiting Borrowers
