Former Finance Minister Seth Terkper has urged the government to avoid borrowing for populist agendas that leave the country burdened with debt.
Instead, he emphasized the importance of prudent borrowing, which involves securing manageable loan terms, favorable interest rates, and ensuring that borrowed funds are invested to yield strong returns. He also called for building financial buffers to enable timely loan repayment.
Populist agendas often focus on implementing social and economic policies aimed at stimulating growth and benefiting the poor, particularly during election periods, but Terkper warned that such practices are often unsustainable.
Speaking at a virtual press briefing on Tuesday, October 15, following Ghana’s Staff Level Agreement on the third review of the International Monetary Fund (IMF) loan-support program, Mr. Terkper pointed out the difficulty for countries, including Ghana, to fund major infrastructure projects solely through their own resources on an annual basis. He noted that a single project can consume a large portion of the country’s total revenue.
While borrowing may be necessary, Mr Terkper cautioned against excessive borrowing that leads to unsustainable debt accumulation. “We must consider debt in terms of borrowing to fulfill populist agendas, which often do not generate sufficient revenue,” said Terkper, who now serves as Executive Director of the Public Financial Management (PFM) Tax Africa Network.
He also advocated for reforms to boost domestic revenue mobilization, stressing the need for lowering taxes and removing “nuisance” taxes to encourage greater compliance from individuals and businesses. According to Terkper, Ghana’s current revenue levels are insufficient to finance major infrastructure projects like roads, railways, and airports, which are critical for delivering quality public services.
Terkper emphasized the need for prudent financial management, stating, “We need to borrow, but with caution—raise enough revenue, implement expenditure control measures, and use electronic means to manage spending.”
Additionally, he called for accelerated debt repayment by addressing arrears and deficits, encouraging the country to live within its means and set aside surplus revenue when commodity prices rise.
“The government should approach debt and financial buffers like households do. Having experienced the Highly Indebted Poor Countries (HIPC) initiative, debt forgiveness, and now debt suspension, we must establish structures to prevent repeating the same mistakes,” Terkper concluded.