Ghana must review its 1992 Constitution to place a cap on the government’s borrowing practices, a Banking Consultant, Richmond Atuahene, has proposed.
Just like what pertains to the United States of America (USA) where the government goes to Congress to seek permits to exceed the cap on borrowing, Dr Atuahene said Ghana must adopt the same procedure to check the government practices.
Dr. Atuahene made these remarks during the 12th edition of the Ghana Economic Forum, currently taking place in Accra, under the theme “Building Back Better: IMF Support, Strategies to Build a Sustainable Economy, and a Dynamic Business Environment.”
He said “Ghana as a country, must from today, begin to look at the constitution. Inside the constitution, according to literature from IMF, the United Nations in 2014, the debt to GDP of any developing country should not exceed 50 percent and developed countries are given a leeway of 60 percent.
“We find ourselves in this position because we have a constitution that has no business of setting a debt cap like the Americans have it. When the Americans had the cap and they had trouble they had to go to Congress and when they go to Congress you will see how they suffer. So we need to come to the constitution and amend it as soon as possible.
“This is one of the shortest strategies that I will recommend so that we don’t find ourselves in such a situation ever again, borrowing and borrowing for consumption. As I have always said, you will pay through the nose, and Ghanaians repaying through the nose.”
Ghana is currently facing an economic crisis that has compelled the government to seek a a $ 3 billion bailout from the International Monetary Fund (IMF), a bailout which has been approved with the first disbursement of $600million made to the country.
Public debt, which excludes state-owned enterprises obligations, rose to 569.3 billion cedis ($49.7 billion) at the end of April, the Bank of Ghana said on its website.
The figure was adjusted to include the central bank’s overdraft to the government, which was securitized in December 2022.
The government received flak for excessive borrowing.
For instance, Former Finance Minister Dr Kwabena Duffuor indicated that the government borrowed much but had not been able to address the challenges of Ghanaians.
“We all understand that the economy is a major disaster, he continued. Despite the fact that there are no jobs, they have a lot of debt. What else have they done with the money, I wondered today as we approached this road? Are those of us who live here not citizens of Ghana?
“Why do you owe money when the roads are so bad? You need a powerful party, one that is sincere and works for the people, to be able to handle the economy effectively. The NDC is that party,” he said.
The Dean of the University of Cape Coast Business School, Professor John Gatsi, also called on the government to open up to discussions on debt negotiations.
He said, “I think the psyche of the government does not appreciate that we are deeply rooted in debt problems and we may not be talking only about balance of payment support but also about debt restructuring, and it seems to me that government is averse to debt restructuring and the faster government opens to that aspect of the discussion the earlier the economy will be redeemed.”
Prof. Gatsi said “Everybody recognizes that the IMF is the only way forward because we don’t have the credibility,” however, till the government opens up for discussions, and fast tracks the IMF negotiations, tougher times will befall the country.
“All depends on the government of Ghana, the faster the government moves to accept other things being indicated by the data and open up, the better it will be for the economy. So right now everything depends on the government so they need to hurry up, open up for the negotiation to be fast-tracked,” he told Accra-based Joy FM.