Setting debt limits not an effective way to grow the economy – Ofori-Atta

Unplanned COVID-related expenditure resulted in over 5% budget deficit, Ofori-Atta

Debt situation is determined by a number of variables, Finance minister

Government to reduce wastage, Ofori-Atta

The Finance Minister, Ken Ofori-Atta, has said suggestions that government should introduce a debt ceiling in order to reduce borrowing was not a scientific approach to grow Ghana’s economy.

According to the minister, the debt ceiling was not necessary because a country's debt situation is determined by variables including its revenue, expenditure and growth.

He added that Ghana is guided by the fiscal responsibility act which ensures that the country always had a positive primary balance and a budget deficit under 5 percent.

“Truly, as your gross domestic product (GDP) grows, your capacity to absorb more debt is higher,” he said at a press conference on Wednesday in response to a question on the possibility of government setting a debt ceiling in order to reduce the level of Ghana’s indebtedness.

Ofori-Atta further explained that the government had outlined fiscal measures in the 2022 budget that would ensure a reduction in wastage and match expenditure against revenue inflows in accordance with Section 25 of the Public Financial Management Act (PFMA).

“The quarterly expenditure ceilings of the approved budget will include up to a 20% downward adjustment, beginning in the first quarter of 2022, in commitments across the board for all covered entities benefiting from the 2022 Budget, subject to revenue performance,” he said.

He further stated that the over 5 percent budget deficit recorded in 2021 was a result of government incurring unplanned COVID-related expenditures geared towards saving lives and livelihoods of Ghanaians.

“This compounded our already stretched finances, from having had to undertake the financial sector clean-up (GH¢21.6 billion) and payments to IPP, fuel suppliers and energy sector, SOEs of GH¢26. 4 billion as of 10 November 2021,” he said.