The Institute of Statistical, Social and Economic Research (ISSER) has indicated that the rate at which the country is accruing debt could be a threat to the economy.
“We need to cut down on our borrowing or risk leaving behind an unthinkable amount of debt for the young ones of today to pay tomorrow,” said Dr. Robert Osei, Senior Research Fellow and Head, Economics Division, ISSER.
“Even though the economy is growing at a very fast rate (14.4%), the amount of debt we owe to both local and foreign institutions and other countries can lead us back to HIPC status,” he said.
He made these remarks at the launch of the State of the Ghanaian Economy Report (SGER 2010) and Mid-Year Economy Report, 2011, in Accra.
At the end of July 2011, the stock of public debt stood at GH¢21.6bn, equivalent to 40.5% of GDP and up from 31.1% at the end of December 2010.
Meanwhile, additional non-concessionary financing is being sourced to close the economy’s wide infrastructure gap. Last month, Parliament gave the state approval to borrow US$3bn from the China Development Bank to build critical oil and gas, and railway infrastructure.
Since then concerns have emerged about the state’s appetite for borrowing, which could threaten sustainability of the public debt.
Dr. Osei said even though it could be healthy for the nation to take on debt, it would be prudent for policymakers to know how much to borrow in order to safeguard the economy’s security.
He cautioned policymakers to take a cue from what has happened to Greece, Portugal and currently Spain, Italy and the USA – who are struggling to manage high fiscal deficits and debts.
In his presentation, Dr. Felix Asante, Senior Research Fellow, ISSER, stated that even though the economy has experienced tremendous growth over the last two and half decades, it is not reflected in the citizens’ standard of living.
“The development experience of the last two and half decades has shown consistent economic growth, averaging 5.4% from 1984 to 2010. Although this growth rate has not been as high as planned, the consistency of it has led to a reduction of poverty over the period.
“Despite the fact that Ghana has been upgraded to a lower middle-income country after the rebasing, there has not been a significant improvement in the standard of living of Ghanaians.
“There is high unemployment, natural resource and environmental degradation, and some macroeconomic imbalances; meanwhile, the gradual shift from agriculture to services over the period does not represent the desired structural transformation.”
He said in order to solve the problem of excessive poverty and increase the peoples’ standard of living, social issues such as education, health, employment, and urbanisation need to be reviewed.
Education, especially at the basic level, must be made accessible to all children while a review of the entire structure of education must be nationally done so that this is not overturned when another political party comes into office, he advised.
“The health of a nation is an asset and must be planned together as a nation, not as an individual political party in power.”
Employment should be increased through expansion of the economy through modernisation of agriculture and enhancement of the manufacturing sector.
He observed that natural urbanisation cannot be stopped, but a structured rural development plan can reduce the rural-urban drift. Village, town, urban and city planning should be undertaken so that urbanisation does not become a problem, he said.
“Science, technology and innovation are the future of the nation. Science and technology must be part of the way of life of Ghanaians. This must be popularised in schools through increased facilities and incentives.”