Government’s $21.1 billion added to public debt spent judiciously says Danquah Institute
The Danquah Institute Head of Research, Dr Frank Bannor made the comments when he addressed the media at the DI office on 17 April 2024
Policy think tank, Danquah Institute (DI) says although political discourse in Ghana has over the years painted public debt as negative it is an important economic tool and the source of investment financing for governments all over the world.
The Institute further indicates that available data for the period, 2017 to 2023, show that the present government has added about $21.1 billion to the stock of public debt. However, the NPP government has judiciously expended the funds.
The Danquah Institute Head of Research, Dr. Frank Bannor made the comments while speaking at the April 2024 edition of the Institute’s monthly media encounter.
He said in 2022 for instance, the government was able to secure a loan of $2.9 billion through Parliament, an amount which was used among other things to finance Phases 1 and 2 of the Sunyani Water Supply Expansion Project, the Tamale Water Supply Expansion Project, the Korle-Bu Teaching Hospital Project, Military Hospital Expansion Project among other capital expenditure.
The economist added that, as part of measures to curb the fiscal deficit, the NPP government passed the Fiscal Responsibility Act, 2018 (Act 982), which charges the Government to ensure that the overall fiscal balance on a cash basis for a particular year does not exceed a deficit of 5 percent of the Gross Domestic Product (GDP) for that fiscal year.
“Unlike the trajectory between 2012-2016, the fiscal deficit witnessed a substantial decline between 2017 to 2019; 6.5% in 2017, 4.5% in 2018 and 4.8% in 2019 respectively”
He explained that a double-digit fiscal deficit was recorded in 2020, that is, a deficit of 10.8%. and this stemmed from the fact that revenue mobilization fell significantly below the target, primarily due to adverse domestic and external conditions.
“The impact of the COVID-19 pandemic and plummeting crude oil prices exerted considerable pressure on both tax and non-tax revenues. For example, the Total Revenue and Grants for the first six months of 2020 stood at GH¢22 billion, accounting for 5.7% of GDP, significantly lower than the target of GH¢29.7 billion, which represented 7.7% of GDP.”
Dr. Banor clarified that contrary to the erroneous impressions being peddled, the trajectory of Ghana’s debt stock under the NPP government, from 2017 to the present, has seen a far more modest addition averaging about 10.68% annually.
This rate, according to the Institute, which is significantly lower than that of the previous administration, suggests superior economic management by the NPP, even amidst global economic challenges.
He said, “Fiscal consolidation between 2012 and 2014 fell short of the established targets. The deficit target for 2013 was set at 5% of GDP; however, as previously mentioned, the actual outcome was double that figure at 10.7%. 68. There was only a marginal improvement in 2014, with the overall deficit remaining high at 10.1% of GDP”.
Dr Bannor noted that with the government going to the IMF for assistance; that is, the Extended Credit Facility arrangement in April 2015, additional fiscal consolidation measures were implemented.
“Even though these measures contributed to reducing the deficit to 7% of GDP in 2015. However, excessive spending amid insufficient revenues, notably in the run-up to the December 2016 election, resulted in a significant increase of the deficit to 9.3% of GDP in 2016, surpassing the programmed target of 5.2% (IDA, 2017)”
Reporting by Philip Abutiate in Accra
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