On public debt accountability

Revenues generated from tax and non-tax sources cannot cater for the numerous public expenditure of the state. The composition of government expenditure includes but not limited to these: debt servicing, meeting national emergencies such as Covid-19, transfer payments including pensions and scholarships, construction and maintenance of social infrastructure, maintenance of economic infrastructure, general administration, and defense. These put excessive pressure on governments to always rely on the alternative of borrowing.

Taking on debts is not a preferred financing alternative for developing countries alone. Industrializing countries as well as advanced states take on debts to finance infrastructure. Almost every country owes another or corporations financial resources. In Africa, new debts are taken to pay off old ones, making debt servicing a challenge for the countries on the Continent. There are national legacy debts in Ghana, accumulated from the days of Kwame Nkrumah to the current President.

The negative impacts of Covid-19 on the economy have compelled the government to take on huge debts which have contributed hugely to the mounting public debt. Capital expenditures, the wage bill and other recurrent expenditures have been major components of the public debt of Ghana. Accumulating prodigious external national debts is a common phenomenon in developing countries.

In the United States of America, there are attempts to segregate the national debt into several categories such as the amount of the debts owned by corporation and private individuals. There are different methods for accounting for the sovereign debts of a country. In Ghana, public debt is composed of both domestic and external debts owed to corporations and states. Accounting for the Public debt of the country should assume a new model which will present a set of data for easy evaluation of the performance of a government.

Currently, the populace have little information about the Public debt of Ghana. It is very appropriate that people in government develop a new system for Public debt accounting for proper assessment of the performance of the government of the day. Governments issue bonds and other debt instruments to pay for old debts. Interest on old debts accumulated by predecessors must be paid as they become due. There are debt obligations such as interest and principal payments, sinking fund and sometimes lease payments that the state must meet.

There are other factors which compel states to accumulate debts and these explain in part why governments must always borrow. Revenues generated from available sources are inadequate to enable a government pay salaries of public sector workers, embark on new projects and run the affairs of the state smoothly. Debts are sources of revenues and borrowing is not forbidden in Finance and Economics.

In the coming years, it should be an obligation of governments to properly account for the debts they always accumulate. There is the need for explanation on the use of borrowed funds for interest payments, retiring old debts and how much is available for government projects. For instance, the entire debt Ghana has taken on in the regime of Nana Akufo-Addo should be accounted for. The government should be able to indicate with absolute clarity, the amount of the borrowed funds that went into paying interest or retiring old debts completely as well as what it used for its projects.

The government of the day should equally be able to account for the use of the public debt capital for projects and other social intervention programs. Did the government use all the revenues from the Sinohydro deal for infrastructure? It is possible to part of the money went into debt servicing which the citizens need to know.

Developing a transparent system of governance in public debt accountability can serve as a yardstick for measuring the performance of the successor government. Those in academia and industry can critically evaluate the optimum use of state funds with such pieces of information. In connection with this, the successor government should be able to communicate effortlessly, the amount of the borrowed funds that have been used to retire the debts of the past government.

Governments must embrace this proposed method for national debt accountability. It will serve as the basis for determining the efficiency of government and its agencies. The use of debt capital is linked to redistributive purposes in welfare policies and the monetary base management of the country. The effectiveness of these policies can be determined if a government willingly reveals its accumulated debts and how these borrowed funds are used at a particular time.

Emmanuel Kwabena Wucharey

Economics Tutor, A growing Activist and Religion Enthusiast.