Executive Director of the Institute for Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, underscored the importance for the government to set a debt ceiling proportionate to the nation’s GDP.
During the Quarterly Economic Roundtable, Prof. Quartey proposed that the government establish a maximum debt threshold aligned with the country’s economic output.
Drawing from recommendations by the International Monetary Fund (IMF) and the Economic Community of West African States (ECOWAS), Prof. Quartey highlighted sustainable debt-to-GDP ratios of 50% and 75%, respectively, as benchmarks for Ghana to consider.
“IMF reports show that each year our debt as a ratio of GDP has been unsustainable. For the IMF, the sustainable debt cap for a country is 50%, and for the ECOWAS it is 75%.
“So there has to be a discussion on where we are going to cap our debt level as a ratio of GDP, whereby we choose our optimal debt level,” he noted.
The professor emphasized the significance of responsible borrowing, which entails judiciously investing borrowed funds and ensuring timely repayment.
He urged for a private sector model in government borrowing, emphasizing the necessity for comprehensive appraisal and evaluation reports.
“We have to borrow responsibly, ensuring we can repay, and borrowing to invest. We need a private sector mindset in borrowing, where there are appraisal reports, evaluation reports, among others,” he emphasized.
Before the Domestic Debt Exchange Programme (DDEP), Ghana’s debt surpassed 100% of its GDP.
Following the implementation of domestic and external debt restructuring, alongside fiscal consolidation measures under the IMF’s $3 billion Extended Credit Facility (ECF) program, the debt-to-GDP ratio is projected to decline to 55% by 2028.