Former Finance Minister Seth Terkper has raised a red flag over the substantial debt burden that awaits Ghana’s next government in 2024.
During a recent media briefing on the country’s International Monetary Fund (IMF) programme and debt restructuring efforts, Seth Terkper expressed deep concerns about the depletion of the nation’s financial reserves and buffers, which are essential for maintaining economic stability.
Mr Terkper emphasized the severity of the situation, stating, “The next administration will be saddled with a significant debt burden. Our reserves and financial buffers, which provide essential leverage for economic management, have been nearly exhausted.”
He attributed this precarious state to the country’s reliance on the Primary Balance, which, according to IMF data, could lead to a false sense of security and complacency.
Highlighting the inadequacies in the current fiscal framework, Terkper pointed out that the criteria based on non-interest expenditure fail to address critical components of Ghana’s economic challenges, such as interest payments, arrears, and amortization.
“Using the Primary Balance as a measure of fiscal health excludes critical elements like interest payments, arrears, and debt repayments,” he explained.
He noted that arrears, including those in the energy and banking sectors, were estimated to be GHC 53 billion in 2021, and a portion of this has been added to the public debt without being reflected in the fiscal framework’s ‘financing’ section.
Seth Terkper also cautioned against premature celebrations of perceived economic progress, noting that any apparent improvements are primarily based on the sacrifices of domestic and external lenders who have endured, and will continue to endure, financial losses.
“There is no need to be jubilant,” Terkper warned.
“The view that we have made progress is premised on the sacrifices and largesse of domestic and external lenders. Our legacy may not make us third-time lucky. After HIPC (forgiveness), we should not have defaulted again. We should have continued on the PRMA path, managing crises with significant inflows from our oilfields and the recent IMF tranches and donor support.”
The IMF reported that Ghana’s primary fiscal balance improved by over 4 percent of GDP last year, but Terkper’s analysis suggests that deeper, more comprehensive measures are needed to secure the nation’s financial future.