In a move to radically deal with the country’s ever-rising debt crisis, the Ministry of Finance has disclosed plans to institute a debt ceiling initiative to permanently curb future unsustainable debts.
According to the Deputy Minister of Finance in Charge of Revenue, Dr. Alex Ampaabeng, there is a need for the country to keep debt at sustainable levels so that fiscal space can be created to accelerate economic growth and development.
In view of this, Dr. Ampaabeng has revealed that the Ministry of Finance intends to make a proposal to the cabinet for the amendment of the country’s Public Financial Management Act to include a debt ceiling obligation on all governments.
Amending the country’s PFM Act to include a debt ceiling will prevent governments from borrowing more than the country’s economy can handle. This will prevent unsustainable debt levels which necessitated the recent IMF program leading to the Debt Exchange Program.
Although the deputy minister was tight-lipped to the specific details of the proposal to the Cabinet, he mentioned that the debt ceiling is tailored around the recommendation of the IMF and the World Bank which suggest 55% debt-to-GDP.
In addition to the debt ceiling, Dr. Ampaabeng further revealed that the government in no time will restore the fiscal responsibility rule of 5% which was suspended as a result of the outbreak of the COVID-19 pandemic.
“There are proposals to amend our PFM. One of the things is that we want to have a debt ceiling. As part of fiscal rules, the minister even signaled in the mid-year budget to restore the 5% fiscal rule,” the deputy minister indicated.
He further explained that, “both IMF and World Bank usually predict sustainable Debt-to-GDP of 55%. Which is the direction we currently are working with. In fact, from where we are in the DDEP we have about 27% saved. We have the bilaterals giving us a percentage. We have the Eurobonds. Once we finish everything together with commercials, we will definitely come to that 55% in no time. So with the rate of debt accumulation reducing, it gives us greater opportunity to achieve that and possibly maintain it. We are bent on doing anything possible so that we don’t go above 55% but in terms of the ceiling, again I can’t pre-empt with the content of the document.
Ghana’s total public debt as of June 2024 stands at GHC742 billion representing 70.6% of GDP. If the debt ceiling is successfully and effectively implemented, successive governments will ensure that the country’s debt to GDP is maintained below 55%.
This proposal is a crucial step in ensuring that Ghana’s economic growth is sustainable and that future generations are not burdened by excessive debt.
