The Dean of Business School at the University of Cape Coast, Professor John Gatsi, has said the rate of borrowing by the Government of Ghana should not be a concern.
Rather, he said, the impact of the debt and borrowing on the economy is what must be discussed to determine whether or not the rising level of borrowing is apt for the country.
There is a growing concern regarding Ghana’s increasing debt stock which currently stands about 68.3 per cent of the country’s total Gross Domestic Product (GDP), gradually inching close to the 70 percent dreaded threshold.
The latest Summary of Macroeconomic and Financial Data issued by the Bank of Ghana noted that Ghana’s total public debt stock is now GH¢263.1 billion equivalent to $46.3bn in July 2020.
Analyst and financial institutions including the Bretton Woods institutions have raised concerns about the rising debt in Ghana.
The World Bank and the International Monetary Fund said prior to the outbreak of the pandemic that the growing debt poses challenges to the fiscal economy.
Speaking on this development on the Business Focus programme hosted by Alfred Ocansey on TV3 Monday October 19, Professor Gatsi said attention must focus on the effect of the debt or borrowing on Ghanaians and the economy in general.
He explained that Japan for instance has over 200 per cent debt to GDP ratio however, the economy is described as one of the best in the world due to the prudent use of their financial resources.
“The rate of borrowing in Ghana is very high,” he noted “But I am not concerned about what we called in Ghana the dreaded 70 per cent ratio.
“Because we know countries which are doing far above 70 per cent debt to GDP ratio but they are solid in terms of export revenue to GDP, they are solid in terms of debt repayment ratio to tax revenue, they are solid in terms of composition and how much of their revenue composition is taken. That is what they are solid.
“What we need to look at and determine whether we are safe or not is about how much of pour revenue is composition taking.
“Our interest payment, remember in 2020 we are expected to pay close to 26 billion Ghana cedis and already our total expenditure is about 14.6 per cent of GDP. If you take Japan for example the export revenue to GDP is well accommodated
“So if you see Japan having in excess of 200 per cent debt to GDP ratio, Japan is a stable economy and classified as one of the greatest economies in the world
“It is not because of the debt to GDP ratio but it is because of export to GDP tax revenue to GDP. All those things are anchored very well.”
Regarding Ghana’s situation, he said “When you look at our rate, they are not anchored very well our primary balance is now in trouble.”