Put a stop to excessive borrowing – World Bank cautions Government of Ghana

•The institution called on government to implement stringent revenue generation measures to reduce the public debt burden

•Ghana’s total public debt rose to GH¢304.6 billion as of March 2021

The World Bank has admonished Ghana to put a stop to excessive borrowing in order to prevent the public debt from increasing, the B&FT newspaper reports.

Already, the country’s total public debt rose to GH¢304.6 billion as of March 2021, rising by GH¢67.9 billion over the same period in 2020.

Country of Director of the Bretton Woods Institution Pierre Laporte speaking at a press briefing in Accra cautioned, Ghana’s current public debt is rather worrying and fears the situation could get worse should government not act decisively.

“Before COVID-19, Ghana’s debt to GDP ratio was below 70 percent, which was manageable. But now, at 78 percent of GDP, it is getting to a point where the description of Ghana is a country at high risk of debt distress. What government has to do now, in our view, is stop the debt from escalating further.”

He continued, “First, by having a prudent approach to borrowing. Borrow responsibly; borrow at the right rate and borrow at the right levels. But also, debt to GDP is a ratio; and so if you increase your denominator, your ratio will go down. So, to the extent that Ghana can accelerate growth, the debt to GDP will go down.”

“Also, by lowering the deficit. Why do you borrow? Because you don’t have enough revenue. By raising your revenue base, it allows you to lower your deficit. Ghana’s revenue to GDP at 12 percent is too low. Ghana can do better, and its good governments which recognise that. Recently, some taxes were introduced to address the problem.” Laporte added.

“Even though nobody is happy when taxes are raised or introduced, we believe that with raising taxes further or efficient collection of taxes, or streamlining tax exemptions, we know Ghana will improve the debt situation. So yes, we are concerned [about the debt situation], and as an economist I think government can do better,” he concluded.

Meanwhile, the International Monetary Fund has earlier added its voice to the worrying public debt situation of Ghana.

The Fund has advised the government of Ghana to implement measures that will control spending and rather focus on revenue generation to lessen the Ghana debt burden which is relatively high.