Ghana Economic Forum 2023: Ghana must amend constitution to incorporate debt limit, says banking consultant

Richmond Atuahene said the move would help maintain economic stability and prevent a return to financial instability in future

Richmond Atuahene, a banking consultant has proposed a constitutional amendment to incorporate a debt limit or a debt cap on governments.

Atuahene said the move would help maintain economic stability and prevent a return to financial instability, ultimately contributing to the overall well-being of the nation post-IMF.

Speaking at the 12th Ghana Economic Forum 2023, Dr Atuahene said: “…for Ghana to build back better post-IMF, we must be prepared to amend certain aspects of 1992 Constitution especially area of a debt Cap or debt limit for instance the Debt to GDP ratio of 50% so that we can prevent future debt crisis as the current domestic debt exchange has basically destroyed both entire financial sector as well as Bank of Ghana.”

The debt ceiling is a limit on the total amount of government borrowing.

The Organisation for Economic Co-operation and Development (OECD) policy paper 28 (2015) posited that for emerging economies like Ghana, the threshold should even be lower at 30 to 50% debt of GDP as they are exposed to capital flow reversals.

The OECD economic policy paper added that high debt beyond the debt threshold could undermine economic activities and destabilize the economy.

Atuahene is therefore warning that at higher debt levels, countries like Ghana could lose the accessibility to international capital markets and market confidence, which would increase their borrowing rates steeply.

“To prevent future debt crisis, the government and the legislature must ensure that the 1992 Constitution is duly amended and the debt to GDP ratio is explicitly enshrined,” he stated.

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