Senior economists in the country are expressing critical reservations about the accumulating debt level under the current administration as they fear the nation may be hit with financial crisis sooner.
The situation is worsened by the amount of money the government spends on compensation for public sector workers and goods and services (consumption expenditure), they noted.
According to data from the latest Bank of Ghana’s summary of financial and economic, Ghana’s debt has soared to record GH¢205 billion as at end July this year. The economists are thereby calling on the managers of the economy to begin pulling the brakes on debt accumulation as the development portends danger for the country
Ghana is moving into an unsustainable territory in debt accumulation and managers of the economy should begin t
o pull the brakes on debt accumulation as the development portends danger for the country, a senior economist with the Institute of Economic Affairs (IEA) Dr John Kwakye cautioned.
“We are moving into unsustainable territory. We should be mindful at the rate at which we are accumulating debts,” Dr. Kwakye noted while commenting on the 2020 budget presented by the Finance Minister in Parliament.
Also, another senior researcher at the Institute of Fiscal Studies (IFS) Dr. Saeed Boakye says Ghana’s current debt level is “scary”.
According to him, the situation is worsened by the amount of money government spends on compensation for public sector workers.
“It is very scary, the debt rate compared with revenue inflows is scary. And the government must do something about it immediately. The government must take bold steps.
“If you compare the situation with other countries, the amount we spend on compensation of staff is too high. We must reduce it in order to do some savings,” he told Francis Abban on the Morning Starr while commenting on the 2020 budget.
He stressed: “We have to be prudent as possible. If some of the flagship programs must be cancelled, we should do so. Something like NABCo should be scrapped because we understand some people are doing nothing but are getting paid”.
Last week, the financial-markets regulator closed down 53 fund managers for various infractions and the government is set to bail out investors at risk of losing $1.4 billion. This add up to the over GHC20 billion already used to clean-up the banking and financial sectors of the economy within the last two years.
Bailouts to lenders during a clean-up of the banking sector and liabilities for excess power and gas that Ghana doesn’t consume have pushed up government debt.
Meanwhile, Dr. Kwakye also raised concerns over the revenue collection challenges of the government.
“We have to be more ambitious because the government is not doing so well with revenue mobilization. As a developing country, we need to gain support from the booming sectors of the economy. The balance in our expenditure side is not really the best. We are spending too much on recurrent expenditure and not on capital expenditure. This is not good for the long term”.