Ghana cannot do without borrowing - Economists

Two economists have indicated that the call for Ghana to move beyond debt is not plausible since no country in the world operates without debt or borrowing.

According to economist, Professor John Gatsi with the University of Cape Coast and Dr Lord Mensah, a senior lecturer at the Department of Finance, University of Ghana Business School, all countries borrow in one way or the other to finance their activities and that Ghana can only ensure that its level of borrowing is measured in a way that it is directed at the core developmental issues of the country.

Renowned industrialist, Dr Ishmael Yamson last week tasked government to pursue a 'Ghana Beyond Debt' agenda in addition its 'Ghana Beyond Aid' project.

According to him, Ghana's growing debt stock (now GH¢138.8billon) is one of the biggest risks that could cripple the economy.

But for the two economists, moving beyond debt is not an option as a country, but it is important that whatever is borrowed is used in providing infrastructure, which is what we need to leverage on as a country to generate more.

Speaking to Business Finder in an interview, Prof Gatsi explained that technically, there was nothing like operating a country without borrowing, however, he said it was prudent that borrowing should be within a certain level that does not create problems for the country.

“Borrowing should be done reasonably so it does not put prepayment pressure on the country that will affect further development of the country.”

Other countries borrow

According to Dr Mensah, most advanced world countries that were even wealthier borrow beyond what they can generate annually.

“As I speak to you now most countries are still paying their debts and some of the debt are even permanent debts, but they don’t worry about it because they are able to determine that the structures they have put in place can finance the debts over the years so they do not have a problem.”

Need to create the real picture of Ghana’s debt

Government and many commentators in the country are not talking about the level of the country debt stock which currently stands at GH¢138.8 billion, Prof Gatsi noted.

“We are often misled to think that when your debt to GDP ratio is low it means that the country is better off, and that is a misleading position. Debt to GPD ratio can go down, but repayment cost can still be very high. Also as a country our actual borrowing as compared to previous period may actually have gone up significantly.”

He indicated that those issues ought to be brought to the discussion table for the country to focus on how to tone down on its debt, and then direct debt to areas that can be described as the creators of strategic assets for the country.

“What we should do is to encourage government to pull down the debt stock.”

Directing borrowing to key areas

Since Ghana can now borrow only at commercial rates due to its lower middle-income status, then it must direct its finances and revenues into the provision of facilities that are social in nature.

Boosting the manufacturing sector

Prof Gatsi pointed out that the manufacturing subsector remains important for the country because when it booms it contributes to revenue mobilization.

“They will employ a lot of people who would pay personal income tax, those people would earn money, consume and pay indirect taxes and those manufacturing companies will also be paying corporate income tax and that is very good for us as a country.”

Dr Lord Mensah stated that “since we need the growth to be inclusive and across the country, normally the country might not be able to generate more to fund the sector so we need to borrow for that purpose and in that case when you borrow and the manufacturing sector starts growing you use that to pay your debt.”

Setting priorities right

Dr Mensah advised that Ghana sets its priorities right by focusing adding value to what is produced for export.