Government is losing the debt stability war – Prof. Kusi

Government’s pledge to reduce Ghana’s public debt through the restoration of fiscal discipline among other things appears to be failing massively as the country’s debt stock continuously rises, Professor Newman Kusi, Executive Director for the Institute for Fiscal Studies has said.

The Akufo-Addo-led government promised to deal with the country’s huge debt, refrain from the ‘irresponsible’ borrowing attitude their predecessors adopted and restore a more sustainable economy with very little public debt.

A year on however, Prof. Kusi believes the government is doing a terrible job at honoring its word as the figures continue to increase at a rather fast pace, posing serious implications for the country’s economy.

Speaking at a roundtable discussion event held by the Institute for Fiscal Studies on Tuesday, March 13, Prof. Kusi noted that Ghana’s public debt increased by 16.3 billion cedis from 2016 to September 2017, a reflection that the economy is worsening as far as debt is concerned.

“The fiscal management policy of the new government that came into office in January 2017 aims at restoring fiscal discipline, reversing the fiscal deterioration it inherited and putting the public debt on a downward and sustainable part.

Unfortunately, it does not appear that the government is winning the debt stability war as total public debt continues to grow with serious implications for the economy. Ghana’s public debt has increased astronomically over the past decade with serious implications for the economy”, he said.

He outlined the country’s increasing public debt from 4.9 billion in 2000 to a massive 138.9 billion in 2017.

“Total public debt stood at 4.9 billion cedis in 2000 but 3 years after, the debt stock had risen to 8 billion representing an increase of 62.6%. At end 2006, Ghana’s debt had dropped 4.9 billion or more than halved following the relieves the country received from the highly indebted countries (HIPIC) and the Multilateral Debt Relief Initiative (MDRI) during the period. Thereafter, the country’s debt began to rise reaching 9.7 billion in 2008 reflecting the large fiscal deficit recorded in the year and the impact of the cedi depreciation on the external debt.

"That was not all, the total public debt continued to rise reaching 35.1 billion at end 2012 and by end 2016, the total debt had jumped to 122.6 billion cedis. The debt stock continued to rise reaching 138.9 billion in September last year.

"Adding the ESLA PLC4.7 billion cedis bond issued in October last year and the sale of 5.3 billion long term bonds, also issued at the end of November last year of which nearly half consisted of fresh borrowing and other half treasury bills that were reconstructed into long term bonds brings the total public debt to about 146.2 billion at end November last year. So total public debts increased by 133.9 billion cedis between 2006 and September 2016”, he noted.



Professor Kusi proposed a comprehensive debt management strategy, limited guarantees of concessional loans that can become contingent liabilities to government, effective monitoring of public debt stand through the setting of strict measures and quantitative targets to guide the efficient delivery of cash in debt management as a few measured strategies to help restore Ghana’s fiscal discipline, reduce public debt and restore the economy on a sustainable path.