Debt Management Efforts Must Be Reconsidered – Economic Think-Tank

At the launching of the 2015 State of the Ghanaian Economy Report in Accra, the Institute of Statistical, Social and Economic Research (ISSER), an economic research think tank, caution the government to take a volte-face of the country’s debt management strategy.

It alarmed of risks that may disrupt the attainment of the 2016 budgetary targets as well economic policies objectives as well as medium-term goals.

The Institute indicated that, the debt strategy of increasing borrowing on the private capital market, while the challenge of spending efficiency remains may be counterproductive.

The economic research think tank said the debt strategy of increasing borrowing on the private capital market, while the challenge of spending efficiency remains may be counterproductive.

The Director of ISSER and coordinator of the report, Professor Felix Asante, said an analysis of the debt management strategy indicated that the situation was not improving.

“Our indicators have exceeded the threshold levels and our risk exposure has worsened,” he said, adding that “we must rethink the debt strategy particularly, the sequencing of it so that we can prioritise the improvement in the spending efficiency in order to control our appetite to borrow on the private capital market”, he said.

He however, warned that the increasing levels of taxes, as well as the energy challenges that the country experienced, may compromise the growth target for the year.

This, Prof. Asante said, were problematic because some of the taxes adversely impacted on the cost of doing business.

The report, which assesses challenges and progress made in the economy last year, will also provide an outlook of what researchers at the Institute make of the economy in a year the country goes to the polls.

“If the private sector investment and growth slow down, it will subsequently affect revenues and compound the fiscal challenges”, Prof. Asante said.

The government has outlined some specific policy objectives it wants to achieve in 2016. Those objectives include the realignment of statutory funds to address the increasing rigidities in the budget to improve flexibility in policy while rationalising the internally generated funds.

Other aspects of the government objectives include the implementation of the Income Tax Act, 2015 (Act 896), which is expected to improve compliance and yield additional revenue equivalent to 0.3 per cent of GDP.

Again, Prof. Asante argued that although those policies were consistent in dealing with the fiscal challenges, there were inherent risks that might derail those achievements in the short to medium term.

Though the government has indicated that it would not overspend in the run-up to the elections, ISSER fears that fiscal outcomes are compromised in election years.

“It is very important that we remain firm in our commitment not to get carried away by the pressure to spend,“ he said.

“The country is still paying for the fiscal sins of 2012”, but was hopeful that the passage of the Public Financial Management Bill 2016 may help protect the managers of the country’s finances against undue political pressure, Prof. Asante said., said an analysis of the debt management strategy indicated that the situation was not improving.

“Our indicators have exceeded the threshold levels and our risk exposure has worsened,” he said, adding that “we must rethink the debt strategy particularly, the sequencing of it so that we can prioritise the improvement in the spending efficiency in order to control our appetite to borrow on the private capital market”, he said.