Ghana’s economic governance and public financial management are set for major structural reforms as the government announces plans to put a ceiling on debt accumulation in addition to the establishment of an independent fiscal council.
Finance Minister, Dr. Cassiel Ato Forson says these reforms are aimed at ensuring fiscal discipline and debt sustainability.
Speaking at a post-budget workshop for MPs in Parliament, the Finance Minister stated that the government intends to amend the Fiscal Responsibility Act to set a debt ceiling, a move designed to prevent excessive borrowing and promote responsible fiscal management.
In addition, the Independent Fiscal Council, he explained, will serve as a body responsible for enforcing adherence to the ceiling and ensuring prudent financial governance.
“We are undertaking key structural reforms to support inclusive growth, fiscal and debt sustainability, sound public financial management, and efficient public service delivery. We want to promote fiscal discipline, debt sustainability by amending the fiscal responsibility Act to include a debt ceiling and the establishment of an independent fiscal council to monitor and adhere to the ceiling,” the Minister indicated.
A debt ceiling sets a legal limit on how much a government can borrow, forcing policymakers to operate within defined fiscal limits. This measure aims to prevent the country from accumulating unsustainable debt levels, which have led to economic instability in recent years.
Ghana’s debt burden has been a major concern, prompting a Debt Restructuring Program under the IMF bailout. Introducing a debt ceiling is expected to curb reckless borrowing, restore investor confidence, and improve Ghana’s creditworthiness on the global market.
However, an earlier conversation on the subject matter during the regime of the previous administration revealed that experts have split opinions on debt ceiling.
Senior Economist at the Policy Initiative for Economic Development (PIED), Dr. Daniel Amateye Anim had told The High Street Journal that the intended plan is a missed priority. He explains that given the current state of the economy, which needs stimulus to grow, just imposing a debt ceiling will stifle the growth of the economy.
He therefore stressed that the focus should be prudent and judicious utilization of the loans which inures to the benefit of the economy, admitting that borrowing in itself is not wrong.
But on the contrary, Professor of Economics at the University of Ghana Business School, Prof. Patrick Asuming also said the intention was a laudable step that will play a crucial role in shielding the economy from running into unsustainable debt. He was also quick to add that imposing just a debt ceiling cannot be the final solution to the country’s public finance problems.
Although the government has announced its intention to amend the Fiscal Responsibility Act, the details of the specific debt ceiling threshold and the operational structure of the fiscal council remain unclear.
It is anticipated the full details will be published in the coming days for analysts to critically scrutinize the move. However, it is clear that as Ghana navigates a challenging economic landscape, the success of these reforms will depend on political will, strong enforcement mechanisms, and a commitment to long-term economic stability.
