The present rigidities in the economy will trigger more borrowing by government unless aggressive revenue mobilisation and expenditure rationalisation is pursued, Economist and Senior Lecturer at the Economics Department of the University of Ghana, Dr. Adu Owusu Sarkodie has said.

According to him, present and past governments appetite for borrowing at high interest cost is worrying and must cease.

He tells Joy Business that government must step up its game by blocking all the revenue loopholes and also manage its public finances prudently.

“The current rigidities in the budget makes it impossible for government to do anything without borrowing. The debt service which is the interest payment plus taxation, has overburdened our revenue and grants which stood at 70% of total revenue and grants in the year 2020, and it is expected based on budget figures. It is expected to have worsen to 82% in 2021”.

To him, using chunk of the total revenue and grants to service debts indicate that the country’s economy is in bad shape.

“If you find yourself in a situation where 70% of your total revenue and grants is used to service only the debt, leaving 30% to finance other expenditure like capital expenditure, goods and transfer services to other government units, then you should know that we are really in a bad situation. In fact one of the reasons why the international credit rating agencies have downgraded Ghana’s economy is the country’s inability to mobilise enough revenue to service its debt.”

“This situation has resulted in the country’s continuing borrowing to finance its expenditure. The position of Ghana’s public debt is really bad”, he added.

Between the year 2006 and 2021, the country’ public debt increased 70 times from ¢4.9 billion Ghana, that is 25% of Gross Domestic Product to its current level of ¢344 billion, which is about 78% of GDP.

“What has accounted for this rampage growing debt stock is government upon government appetite to borrow especially from the Eurobond market”, Dr. Sarkodie stressed, adding “most of the loans are contracted at high rate”.

“For example, Ghana borrows from the Eurobond market at the rate of 8%, whiles Japan borrows at 0.1%. Between 2017 and 2019, the energy debt, the financial clean up and the fiscal impact of the COVID-19 have accelerated the growth of the debt stock”, he further pointed out.

“In fact what has exacerbated the problem is the slow growth of revenue. The growth of debt stock outpaces the growth of revenue”, he concluded.