Set a debt ceiling and borrow responsibly - Prof. Peter Quartey to government

The Executive Director of the Institute for Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, has emphasized the need for the government to establish a debt ceiling that is relative to the country's GDP.

Speaking at the recent Quarterly Economic Roundtable, Prof. Quartey suggested that the government should determine an optimal debt limit that it will not exceed.

He referenced the International Monetary Fund (IMF) and the Economic Community of West African States (ECOWAS), which recommend a sustainable debt-to-GDP ratio of 50% and 75%, respectively.

“IMF reports show that each year our debt as a ratio of GDP has been unsustainable. For the IMF, the sustainable debt cap for a country is 50%, and for the ECOWAS it is 75%.

“So there has to be a discussion on where we are going to cap our debt level as a ratio of GDP, whereby we choose our optimal debt level,” he noted.

The professor highlighted the importance of responsible borrowing, which involves prudently investing borrowed funds and timely repayment.

He advocated for a private sector approach to government borrowing, which includes thorough appraisal and evaluation reports.

“We have to borrow responsibly, ensuring we can repay, and borrowing to invest. We need a private sector mindset in borrowing, where there are appraisal reports, evaluation reports, among others,” he emphasized.

Before the Domestic Debt Exchange Programme (DDEP), Ghana's debt exceeded 100% of its GDP.

However, with the implementation of domestic and external debt restructuring, along with fiscal consolidation measures from the IMF's $3 billion Extended Credit Facility (ECF) program, the debt-to-GDP ratio is expected to decrease to 55% by 2028.

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