Ghana’s Ghc56 billion debt not a problem if… - Economist

An Economist and Lecturer at the University of Cape Coast Business School, John Gatsi, has argued that Ghana’s rising debt stock should not necessarily alarm Ghanaians only if it provides income generating infrastructure for the country.

Latest figures from the Central Bank put Ghana’s public debt at 56 billion cedis. Government has already borrowed two billion within the first two months of this year and indications are that the debt stock could reach its record high by the end of 2014.

Economists, including the NPP’s Dr. Mahammudu Bawumiah have questioned government’s excessive borrowing, predicting long term ill consequences for the economy if the trend is not checked.

But John Gatsi disagrees, he told Kumasi-based Ultimate Radio, Ghana’s current economic growth rate calls for more infrastructural investment, justifying the loans contracted. He also pointed out that Ghana is still within the acceptable range of debt to GDP ratios.

Buttressing his submission, he explained, “the purpose for which a nation goes for loan is to finance its infrastructure and if you look at Ghana, which is growing averagely within the last seven years around 7.5%, such a level of growth needs massive infrastructural investments to support its growth. We need infrastructure in energy, roads, telecommunications and other social infrastructure to protect the growth of the economy”.

Outlining the essence of contracting loans to support the economy, he stated, “if you take part of the Chinese loan which has been released for the construction of the gas processing plant at Atuabo, you can tell the impact it will have on the economy especially on the energy sub-sector. The Bui Dam and several other projects including roads have all been completed with debt expenditure.”

Mr. Gatsi further bemoaned the emotions several commentators attach to discussions to do with public debt figures without doing an informed extrapolation of the issues at stake. He, however, wants the government to move beyond just contracting loans and explain to Ghanaians how the loans are being expended.

“What we should be doing is that when we read out our debts, we should also quickly outline the activities and infrastructure that has come to being as a result of contracting that much debt, but that is not forthcoming. If you have about 50 million cedi debt, the understanding is that when we come to the country, we should see infrastructure that we can identify that these debts have actually provided,” he charged.

Mr. Gatsi, however, cautioned that if the government does not work at stabilizing and shoring up the value of the cedi, the burden and cost of offsetting loans and its implications on demand for foreign currency could hurt the country badly in the long term.

He also wants the country to be mindful of its debt sustainability ratio and ensure that the country stays within the acceptable debt to GDP ratios.