Let’s put a cap on borrowing to stop the increase in debt; it’s done by the US Congress – IEA
The Institute of Economics proposes a cap on the country’s annual borrowing to prevent a further rise in the level of debt, which has reached unsustainable levels and could generate sharp gains for the economy.
He therefore wants parliament to implement a finance bill for loans, like the policy imposing a spending limit.
This system is used by the US Congress to curb executive borrowing.
At a press briefing on the 2021 budget and economic policy, IEA research director Dr John Kwakye said that if the government wishes to borrow beyond the initial borrowing, for a whatever reason, it has to come back to parliament for approval.
âParliament should impose annual limits on borrowing or indebtedness at the same time as it approves the appropriation bill imposing a spending limit. If the government wishes to borrow beyond the original borrowing / indebtedness limit, for whatever reason, it must come back to Parliament for approval. This is the system used by the US Congress, for example, to curb executive borrowing. “
Ghana’s public debt stock reached an alarming level, reaching 341.8 billion yen in September 2021.
The interest payment alone is projected at 37.4 billion yen, which is up to 46.6% of the projected tax revenue of 80.2 billion yen. According to the IEA, this is of great concern and it is therefore important to respect the projected deficit path in order to reduce the rate of borrowing and bring debt and debt service down to sustainable levels.
The Minister of Finance during the presentation of the Budget and the 2022 economic policy indicated that the government’s budget consolidation plan has been accelerated in the medium and long term.
According to him, the primary balance for 2022 is expected to be positive for the first time after the Covid 19 pandemic, adding that this was a very strong commitment by the government to reduce the debt-to-GDP ratio and also improve significantly debt liquidity ratios.
He added that in addition to this goal, and to support the reduction in the rate of debt accumulation, the total limits set for concessional and non-concessional external borrowing were lowered from $ 2.5 trillion to $ 2 trillion. of dollars.
Dr Kwakye said these commitments are reassuring and should be followed up, adding: âIn fact, we had proposed that in order to contain borrowing and debt build-up, Parliament should impose annual ceilings on borrowing or debt. debt at the same time as it approves the appropriation bill imposing spending limits. If the government wants to borrow beyond the original borrowing / indebtedness limit, for whatever reason, it must come back to Parliament for approval.
Revenue mobilization, a long-standing challenge for the country
The IEA has also expressed concern about the country’s slow revenue mobilization, saying revenue collection has been a long-standing challenge, with Ghana’s efforts falling significantly short of its peers.
Dr John Kwakye said the argument has always been that substantial income is lost every year through various channels including tax exemptions, property taxes, illicit financial flows, among others, stressing that the gaps need to be addressed to that sufficient income is collected to support the development of the country.
âWe have long argued that substantial income is lost every year through various channels, including tax exemptions, property taxes, illicit financial flows, non-compliance, the informal sector, administrative errors, fraud and corruption. We asked that these loopholes be filled so that sufficient income is collected to support the development of the country. “
“We are pleased to note that the budget proposed measures to address some of these gaps in addition to other measures to increase income,” said Dr Kwakye.
The budget contains initiatives to enable young people to be employable
On employment, the IEA said the budget contains important initiatives to enable young people to become employable and also to start their own businesses. Initiatives include the YouStart Initiative and the Ghana CARES Obataanpa program.
âGovernment policies aimed at providing vocational training and strengthening the entrepreneurial capacities of young people, while helping the private sector to develop, promise to help the unemployment situation and should be followed up. The GhanaCARES program contains important pillars to transform the economy into a modern, resilient and ultimately ‘beyond aid’ economy if implemented as planned â.