Director of the Institute of Statistical, Social, and Economic Research (ISSER), Professor Peter Quartey, has emphasized the importance of establishing a debt ceiling for Ghana to avert future debt restructuring.
He recommended that the government should legally limit its borrowing to 60 percent of the Gross Domestic Product (GDP) to help mitigate debt servicing costs in upcoming budgets.
Prof. Quartey made these remarks during the launch of the State of Ghanaian Economy Report at the institute’s facilities. This event reflects ISSER’s dedication to fostering informed, evidence-based decision-making and promoting sustainable development.
The gathering served as a constructive forum to analyze the current economic landscape and its repercussions for the Ghanaian population.
The Professor urged the government to amend the fiscal responsibility law to incorporate a debt ceiling, which would help maintain fiscal deficits and debt levels within manageable limits.
He further emphasised the importance of the government rationalising its expenditures, especially in procurement and compensation, and advocated for the implementation of digital payroll systems to improve efficiency.
Ghana’s debt crisis deepened in 2022 when the nation defaulted on servicing both its external and internal debts. This situation was exacerbated by the country’s inability to access international markets, attributed to its junk status assigned by global rating agencies.
On December 5, 2022, the Ghanaian government initiated the Domestic Debt Exchange Programme (DDEP) to restructure GHS137 billion of its domestic debt.
Professor Quartey noted that Ghana’s tax capacity is low, as reflected in a tax-to-GDP ratio of 12.3 percent in 2022 and 13.64 percent in 2024. This low tax inflow has created a cycle of inadequate revenue generation needed for infrastructure development.
According to the Economics professor, the reliance on debt financing, particularly for interest payments, has become the largest expenditure category, contributing significantly to the ongoing economic instability.
He urged the government to establish a robust revenue-based system by enhancing the capabilities of revenue-generating institutions, particularly the Metropolitan, Municipal, and District Assemblies (MMDAs).
The Director called for the effective monitoring of all government expenditures across MMDAs to be integrated into the GIFMIS system. He also suggested that MMDAs adopt suitable technology to improve property rate collection, decrease dependency on central government transfers, and encourage local development.
Additionally, the Professor encouraged local governments to invest in appropriate information technology systems to enhance their tax capacity.