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Tuesday 21 September 2021
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Think-tank urges Ghana government to be vigilant over debt

The Centre for Policy Analysis (CEPA), a Ghanaian non-gove rnmental think-tank for good economic management and governance, on Tuesday aske d the Government to be vigilant over its huge build-up in public debt because it c ould erode economic gains.

Briefing the media on Tuesday ahead of the launch of its 2010 mid-term report on the economy, Dr Joe Abbey, Executive Director of CEPA, said it was important fo r the government to keep an eye on debt sustainability in order to avoid getting b ack to the Heavily Indebted Poor Country (HIPC) status.

The public debt stock, after falling sharply on account of the HIPC initiative a nd the multilateral debt relief initiative involving external debt cancellation,

debt forgiveness and debt relief, rose from US$9.2 billion in 2009 to $10.3 bill i on at the end of June 2010.

Dr Abbey said there was the likelihood that the debt could rise to unsustainable levels unless the economy expanded and grew to enable government service the de b t.

“In respect of budgetary operations, the outlook points to a 2010 deficit at lea st as large as that of 2009 – missing the target by a wider margin than in 2009, ” he said, citing increasing public sector policy due to full implementation of a

new pay policy.

Dr Abbey said the public sector wage bill for 2010 would increase by more than t he 17 per cent projected.

Interest payments would also be higher than projected because of the higher size of borrowing and higher cost of borrowing by government. Without further net ac c umulation of payment arrears, development spending would also exceed its target.

Government has projected a budget deficit target of eight per cent of GDP for 20 10.

On inflation, Dr Abbey said the current inflation targeting policy had restricte d the availability of credit, which had crowded out the private sector due to hi g h interest and lending rates.


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