Ghana needs debt ceiling to prevent another round of debt restructuring - ISSER

Professor Peter Quartey, Director, of the Institute of Statistical, Social, and Economic Research (ISSER), says Ghana needs a debt ceiling to prevent another round of debt restructuring.

He said the government must by law borrow at a threshold of 60 per cent of Gross Domestic Product (GDP) to reduce debt servicing in future expenditures.

Prof Quartey was launching the State of Ghanaian Economy Report, which was held at the premises of the Institute.

The event aligns with ISSER’s commitment to promoting knowledge for evidence-based decision-making and sustainable development.

It provided an objective platform to discuss the current economic situation and its impact on Ghanaians.

The Professor said the government must review the fiscal responsibility law to include a debt ceiling to ensure that deficits and debt are contained within sustainable thresholds.

He said the government must ensure that there was expenditure rationalisation, especially in procurement and compensation, through the digitalisation of payroll systems.

Ghana was plunged into serious indebtedness when it failed to service its external and internal debts in 2022.

The country’s debt situation was worsened by its lack of access to the international market due to its junk status ranked by international rating agencies.

On 5th December 2022, the government of Ghana launched Ghana’s Domestic Debt Exchange Programme (DDEP) to restructure GHS137 billion of the domestic debts.

Prof. Quartey said Ghana’s tax capacity was low, as evident in its low tax-to-GDP ratio, which stood at 12.3 per cent in 2022 and 13.64 per cent in 2024.

He said this led to a vicious cycle of low tax inflows under the provision of infrastructure.

This, according to the Professor of Economics, forced Ghana to rely heavily on debt through interest payments, which constituted the single largest expenditure item contributing to the recent economic instability.

The Director urged the government to implement a strong revenue-based system by enhancing the capacity of prospective revenue-generation institutions such as the Metropolitan, Municipal, and District Assemblies (MMDAs).

He said the government must ensure expenditure rationalisation, especially in procurement and compensation, through the digitalisation of payroll systems.

The ISSER director also advised the government to ensure that all government expenditures across the MMDAs are captured under the GIFMIS system.

He advised the MMDAs to appropriately design and deploy technology to boost property rate collection, reduce reliance on central government transfers, and promote local development.

The Professor also urged local governments to invest in appropriate Information Technology(IT) systems to increase tax capacity.