Former Finance Minister and also the current Economic Advisor to the President, Seth Emmanuel Terkper, has called for sustained fiscal discipline and structural reforms as the foundation for restoring private sector confidence in the aftermath of Ghana’s debt default.
Speaking at a webinar organised by the Ghanaian German Economic Association on Ghana’s economic outlook, Mr Terkper argued that macroeconomic stability remains inseparable from government conduct, stressing that the issue of confidence “cannot be answered without government.” In his view, the public sector’s fiscal behaviour directly shapes the operating environment for businesses, banks and investors.
Tracing Ghana’s recent economic history, he noted that although the country benefited from HIPC debt relief and later oil discoveries, it failed to consolidate those gains. Instead of strengthening buffers and public financial management systems, the country “moved on to a default situation,” exposing structural weaknesses in fiscal governance. The eventual domestic debt restructuring, he observed, saw “the chickens came home to roost,” with the impact reverberating through the financial sector.
He emphasised that the domestic debt exchange programme, including “haircuts and others,” significantly affected savings in private banks and investment portfolios, undermining trust in the financial system. For him, this episode underscores the degree of interdependence between fiscal stability and private sector resilience.
Seth Terkper further highlighted the structural shift that occurred when Ghana attained middle-income status in 2010. “When you become a middle-income country, the consequence is you lose grants and concessional financing,” he noted, explaining that the transition compelled the country to rely more heavily on capital markets. However, the move into commercial borrowing was not matched with adequate reforms in domestic revenue mobilisation and expenditure discipline.
He pointed to persistent weaknesses in tax administration, stating that “Ghana does not have a domestic tax system comprehensive covering income tax and VAT.” While technological tools such as AI can improve invoice tracking and customs collection, he argued that without an integrated fiscal system linking domestic and external revenue streams, the overall effectiveness remains limited.
Beyond revenue mobilisation, he stressed that the “policing of economic activity… is very fundamental” in ensuring fiscal prudence. In his assessment, the government must not only provide incentives but also enforce discipline, manage deficits responsibly and prevent systemic imbalances that spill over into the private sector. The “interdependence between the public and private sectors is inevitable,” he said, adding that instability in public finance inevitably constrains business expansion, access to credit, and investment flows.
Seth cautioned that Ghana must not place an excessive burden on taxpayers, particularly in financing state-owned enterprises and underperforming projects. He argued that public guarantees and fiscal support should be carefully assessed to avoid transferring avoidable risks to citizens.
On the current adjustment programme, the government advisor acknowledged that “austerity has costs and benefits,” but maintained that decisive action was unavoidable once Ghana entered default. “When you have defaulted, and let us understand that we defaulted,” he said, stabilisation becomes urgent to prevent deeper macroeconomic deterioration. While recognising that “we are just beginning… we are just stabilising, and it has cost,” he argued that the alternative would have been a more prolonged crisis, potentially similar to distressed economies that struggled to regain market access.
He explained that one of the immediate consequences of the default is constrained borrowing capacity. “The outcome of the default is that there’s a borrowing limit,” he stated, noting that the government has had to depend heavily on short-term Treasury bills due to the temporary closure of the domestic bond market. Such instruments, he implied, are unsuitable for financing long-term infrastructure, reinforcing the need to rebuild credibility before returning fully to medium- and long-term bond issuance.
According to him, restoring trust in fiscal management is central to reopening markets and reducing borrowing costs. Government is “looking at… bringing back credibility,” supported by improving credit ratings and cautious re-engagement with investors. He expressed optimism that sustained discipline and buffer rebuilding would gradually strengthen confidence.
He maintained that macroeconomic stability is the primary enabler of private sector growth. With strengthened public financial management systems, responsible borrowing practices and deeper domestic capital markets, “the grounds will be laid for a gradual rebound,” creating a predictable environment for investment, job creation and long-term economic expansion.
