Stop Excessive Borrowing – World Bank Warns Government of Ghana
â¢ World Bank warned Ghana against excessive borrowing
â¢ The institution called on the government to implement strict revenue generation measures to reduce the burden of public debt.
â¢ Ghana’s total public debt reached GH Â¢ 304.6 billion in March 2021
The World Bank has urged Ghana to end excessive borrowing to prevent public debt from rising, reports the B&FT newspaper.
Already, the country’s total public debt stood at GH Â¢ 304.6 billion in March 2021, increasing by GH Â¢ 67.9 billion during the same period in 2020.
The country of the director of the Bretton Woods institution Pierre Laporte speaking at a press briefing in Accra warned, Ghana’s current public debt is rather worrying and fears that the situation will worsen if the government does not act decisively.
âBefore COVID-19, Ghana’s debt-to-GDP ratio was below 70%, which was manageable. But now, at 78 percent of GDP, it comes to a point where Ghana’s description is a country at high risk of debt distress. What the government needs to do now, in our opinion, is to prevent the debt from increasing further. ”
He continued, âFirst, by taking a prudent approach to borrowing. Borrow responsibly; borrow at the right rate and borrow at the right levels. But also, debt to GDP is a ratio; and so if you increase your denominator, your ratio will go down. Thus, to the extent that Ghana can accelerate its growth, the debt-to-GDP ratio will decrease. ”
âAlso, by reducing the deficit. Why are you borrowing? Because you don’t have enough income. By increasing your income base, it allows you to reduce your deficit. Ghana’s income to GDP at 12 percent is too low. Ghana can do better, and its good governments recognize it. Recently, some taxes have been introduced to solve the problem. added Laporte.
âWhile no one is happy when taxes are raised or introduced, we believe that by increasing taxes further or collecting taxes effectively, or streamlining tax exemptions, we know that Ghana will improve the debt situation. . So yes we are worried [about the debt situation], and as an economist, I think the government can do better, âhe concluded.
Meanwhile, the International Monetary Fund has previously added its voice to Ghana’s worrying public debt situation.
The Fund advised the government of Ghana to implement measures that will control spending and focus instead on income generation in order to reduce Ghana’s relatively high debt burden.