Dr Lord Mensah, an economist and lecturer at the University of Ghana Business School (UGBS) has told Ghanaians to prepare for a difficult 2021 and beyond.
Speaking in an interview monitored by norvanreports on Starr FM on Monday, Dr Mensah said most of the freebies being enjoyed by Ghanaians now will no longer be available next year adding that, the only way Government is going to shore up shortfalls in revenue is to increase taxes.
“We should expect more tax increments and some freebies that we are enjoying are not going to be there. So citizens should expect a tough 2021. I was expecting that at the point that we had COVID-19, we would have cut down some expenditure where we had control but we kept spending and you can’t eat your cake and have it,” he stated.
“I predicted that there’s no way we would provide freebies till September and not go to December. We are hiding behind COVID-19 and going in excess of our expenditure and that’s not good for all of us,” he added.
Speaking further, Dr Mensah warned that Ghana’s current public debt to GDP is hitting dangerous levels adding that Government must find innovative ways to cut spending.
“The best you can do is prioritize our expenditure. Don’t go on unnecessary expenditure. If we are able to do that, we should be able to handle our debt level. For me, I will say we need to be careful the way we are increasing our debt.”
“That 71% you are calling now is dangerous but if they are into projects that will pay for themselves, that’s okay but we don’t see that in Ghana. We need to look at the debt issues and our expenditure. I will not call for another IMF because the next IMF help that we’ll be going to seek, I don’t think it will be comfortable for us. Effectively, there are things we can hold on to ourselves that will not take us back to IMF but we are not able to do that. We should ask ourselves why?” he averred.
According to the Bank of Ghana in its November 2020 Economic and Financial Data Report, the country’s public debt has risen by some 2.7 per cent from 68.3 per cent in July to 71 per cent of GDP.
In monetary terms, Ghana’s current debt stock translates into some Ghs 273.8 billion.
Of the total amount, debts owed externally stands at Ghs 138.5 billion, representing 35.9 per cent of GDP – an increase of 5.1 per cent since September 2019.
Domestic debts on the other hand, amount to some Ghs 135.3 billion, representing 35.1 per cent of GDP – an increase of 6.1 per cent since September 2019.
Ghana, was in the middle of this year added to a list of 28 countries classified as being in high risk of debt distress by the IMF and World Bank.
The country’s debt-to-GDP is projected to hit 76.7 per cent by the end of 2020.
As at end-September 2020, Ghana had recorded a primary balance of negative 4.1 per cent of GDP compared to a positive primary balance of 0.1 per cent of GDP for the same period last year.
Also, Government revenues as a percentage of GDP as at end September 2020, stood at 9.4 per cent with expenditure reaching 18.4 per cent.
This imply a fiscal deficit of 9 per cent of GDP as against Government’s revised fiscal deficit target of 11.8 per cent for end-2020.