The Ranking Member on Parliament’s Finance Committee, Mr Cassiel Ato Forson, has urged government to, as a matter of urgency seek debt relief from the International Monetary Fund (IMF) to curb the country’s rising public debt.
Ghana’s total public debt stock as at the end of May 2021, stood at ¢332.4 billion, an increase of almost GH¢30billion from a previous GH¢304.6 billion recorded at the end of the first quarter of 2021, according to the latest Summary of Economic and Financial Data from the Bank of Ghana.
The new debt figure brings Ghana’s debt to Gross Domestic Product (GDP) ratio to 76.6 per cent as of the end of May.
Speaking at a Policy Dialogue on the Economy organised by the Minority Caucus in Parliament in Accra on Monday, Mr Forson, described the country’s debt stock sustainability as worrying.
He said the IMF Debt Sustainability Analysis (DSA), in 2019 prior to the outbreak of the COVID-19 pandemic, put Ghana at a high risk debt distress, adding that the situation was likely to worsen this year if government did not take a relook at its borrowing plans.
The Former Deputy Minister of Finance under the erstwhile NDC government also noted that even though Ghana had not been declared as a Highly Indebted Poor Country (HIPC) by the Bretton Woods institution, the debt sustainability indicators showed that the country was heavily Indebted.
“Comparing the debt sustainability indicators in the year 2020 to those in the year 2001, when Ghana was declared HIPC, it is clear that 2020 indicators are worse than those in 2001, even though the debt to GDP indicator shows an improvement,” he added.
Mr Forson, therefore, advised government to seek immediate assistance from the IMF to ensure that the rising public debt was halted.
“We expect the Akufo-Addo/Bawumia government to seek an urgent debt relief from the IMF through the newly proposed Debt Relief Initiative known as the Common Framework for Debt Treatment beyond the Debt Service Suspension Initiative (DSSR) which can be likened to HIPC.
“We also submit that failure by the Akufo-Addo’s government to do so as recommended will mean that within 18 months from today, Ghana will be exposed to a high risk of default on its debt service obligation, which will plunge this country into a deeper economic crisis,” he said.
On his expectations of government going forward, Mr Forson said capital expenditure was likely to reduce, adding that government would not be in a position to increase public sector wages, even to the minimum level of inflation.
He also noted that government in the coming days would spend more on interest servicing, while the country’s international reserves was also expected to reduce.
“This is simple because I do not expect forex to come into the economy as expected, because government’s borrowing abilities will reduce in as much as we will be spending a little bit more as outflows being amounts that we will use in repaying our debts,” he explained.
Mr Forson, who is also the Member of Parliament for Ajumako-Enyan-Esiam, urged government to ensure that any newly imposed taxes targeted the right people.
“They should be taxes that will spur economic growth targeting the right people of the economy and should not disturb the running of the economy,” he said.
Mr John Kumah, a Deputy Finance Minister, speaking at the event was adamant the economy was on a strong footing.
“Just to remind us that as we speak Ghana has hit the highest in history of our cocoa production so the economy is on track,” he retorted.