Professor Newman Kwadwo Kusi,Executive Director of the Institute for Fiscal Studies (IFS) has stressed the borrowed funds to invest in projects that have high private or social returns in order to maintain debt sustainability.
According to him, the country’s public debt situation had worsened in recent years and the country now faced a high risk of debt distress and increased overall debt vulnerability. Prof. Kusi was speaking on the topic: “Public debt and sustainability: Whither Ghana?” at an Economy of Ghana Network (EGN) programme organised by the Institute of Statistical, Social and Economic Research (ISSER) in Accra.
He said the government must formulate and implement prudent, effective and sound debt management strategies to address the current situation. Additionally, he said, the government must formulate an international debt workout mechanism and balance the choice of financing sources and instruments. Prof. Kusi noted that total public debt service-to-revenue ratio including payments on external and domestic debt is not only on a rapidly increasing path but had breached the indicative long term threshold. “Debt service now absorbs a large part of domestic revenues, leaving the country vulnerable to shocks. All other debt indicators have deteriorated owing to deteriorated domestic and external borrowing conditions, weak fiscal consolidation, and weakening of the domestic currency,” he added.
Prof. Kusi mentioned that maintaining the country’s debt sustainability would require carefully designed fiscal consolidation measures combined with a more ambitious medium-term adjustment to spur robust economic growth, enhance domestic revenue mobilisation and reduce the worsening debt and debt-service indicators. “Maintaining Ghana’s debt sustainability will also depend on a multitude of other factors that include not only a strong and sustained future economic growth but also appropriate borrowing conditions, terms of trade, foreign exchange and interest rate risks, among others” he said. Prof. Kusi disclosed that the country would require a total of US$28.8 billion from now to 2025 to service its external debts. He asked government to revamp the agriculture and the manufacturing sectors as means of resolving the current economic challenges, stressing that, government must invest in projects that would lead to job creation.
Prof. Kusi called for the transformation of the economy and not to allow importations of products that the country could easily produce. Prof. Augustin Fosu, EGN Macroeconomics Subject Matter Specialist with ISSER noted that countries would always experience debts; however, government must strive to reduce overspending and decrease its expenditure, especially during the election year.
By Joseph Edu Archison & Benedicta Folley
Source: Ghanaian Times
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