Former Minister for Finance, Seth Terkper, has discouraged the comparison of Ghana’s supposedly ‘low’ public debt to Gross Domestic Product (GDP) to that of higher public debt to GDP of advanced economies.
According to the former Finance Minister, making such comparison is wrong and only reveals the invalid or faulty reasoning of persons in understanding the different debt burdens or impact on the economies of advanced and developing countries.
A section of the Ghanaian populace along with some officials of government, have downplayed the enormous danger of Ghana’s fast rising public debt arguing that advanced economies such as the U.S. and Japan have over 100 per cent debt to GDP ratios – U.S. and Japan have 127% and 252% debt-to-GDP ratios respectively.
Their assertions is to imply that Ghana can sustain its fast rising debts.
But Mr Terkper in driving home his point on the reason why such a comparison is wrong, made an analogy between a rich and a ‘not so poor’ neighbours.
“A rich neighbour who has multiple houses and several flourishing businesses but takes on huge debts and the ‘not so poor’ neighbour whose house is mortgaged and has only one source of income being his salary as an employee, take on the same level of debts or even close to the debts the rich neighbour takes on, who among the two do you think is likely to be able to sustain and repay the debts,” he quizzed.
Mr Terkper speaking further argued that, unlike Ghana and other developing countries, the advanced countries can sustain their debts because they have a much more stronger and resilient economies.
“When Covid-19 hit, did you hear of any advanced country borrowing to fight the pandemic? President Biden just signed a $1.9 trillion covid stimulus for the US, despite the huge debt to GDP of Japan, it has the ability to weather its debt because its economy is strong and resilient,” he said.
“Let’s be realistic and not compare ourselves to them, they have deeper financial markets, they are able to pay their debts, we go to borrow from them they don’t come to borrow from us. When Ghana was declared HIPC in 2004, we had 100% debt to GDP and so did Japan, but Japan wasn’t declared HIPC,” he added.
He made the above assertions sharing his outlook on Ghana’s economy.
Ghana’s debt to GDP currently stands at 71 per cent and is further projected to increase to 80 per cent by the end of this year. Fiscal deficit is also projected to end 2020 at 11.8 per cent.
On the way forward, Mr Terkper asserts that government needs to implement homegrown policies to control the country’s debt.
