Govt must seek debt relief, cancellation to ease debt burden – IFS

The Institute of Fiscal Studies, IFS, has urged the government to immediately seek debt reliefs and cancellation from its major creditors.

According to the Institute, while it was true that the pandemic had affected the country’s fiscal position, the ‘head-scratching choices’ of the government to alleviate the economic impact of the pandemic puts the country in a very dire position.

Speaking at a press briefing to assess government’s fiscal policy amid the COVID-19 pandemic, Senior Research Fellow at the Institute, Dr Said Boakye, said the move would enable the government reduce expenditure on public debt servicing.

“Given the country’s poor and delicate fiscal position, which has dramatically worsened due to the COVID-19 pandemic and some of the policy choices of the government, we recommend that government should immediately seek debt reliefs, including debt cancellations, from its major creditors so as to minimise the enormous size of the country’s debt service expenditure, which is consuming the biggest chunk of the country’s revenues,” he said.

He further called on the government to take steps to generate more revenue, particularly from the extractive sector in the short to medium-term.

The emergence of the COVID-19 pandemic, required governments to move rapidly to cushion individuals and businesses.

This resulted in increased government and external financing needs as policy interventions were drawn to sustain household incomes, business activities, and the macroeconomic fundamentals towards a quick and sustainable recovery.

The Bank of Ghana in May this year, announced that the country’s debt stock increased by 16.9 billion cedis from January to March.

The figures, which were contained in the Bank of Ghana’s Summary of Economic and Financial Data, also indicated that the country’s total debt stock by March 2020 was 236.1 billion cedis, representing 59.3 per cent of the GDP.

Last month, Finance Minister, Ken Ofori-Atta, during the mid-year budget presentation in Parliament, announced that Ghana’s current debt is GH¢255.7 billion, as of June 2020. This means some GH¢50 billion has been added to the debt stock in the last 12 months.

He also stated that the current debt stock is 66.36 per cent of GDP.