Borrowing at a commercial rate at the moment will not be helpful to the country because of huge interest payments, the Director of the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, Professor Peter Quartey has said.
He suggested to the government to rather focus on raising revenue domestically by enhancing the tax net and also improving tax collection measures.
Prof Quartey cautioned the government to hasten slowly in returning to the international capital market to borrow following the $ 3 billion programme approved by the International Monetary Fund (IMF).
Speaking on the Ghana Tonight show on TV3 Wednesday, May 24, Prof Quartey said “it is good to work your way back to ensuring that you are credit-worthy. That feeling that your country is credit-worthy itself is good, and that attracts investments but I will caution that we hasten slowly in going back to the capital market because borrowing at a commercial rate is not the best option.
“It brings huge interest payments which affect our ability at debt sustainability. We should explore first, raising domestic revenue, and expand the tax net, not to overburden the same people but, to make tax collection more efficient. I believe a lot has been done but we can deepen that and enhance that option for raising more revenue domestically.”
His comments come after President Nana Addo Dankwa Akufo-Addo gave a hint of returning to the capital market soon.
Mr Akufo-Addo stated that although Ghana was not in a rush to return to the international capital market which he said had served as a major source of revenue for the Government, there was a need to take advantage of global savings.
Asked why the deal took so long for it to be approved by the Fund while speaking at the 3rd Qatar Economic Forum on Tuesday, May 23, he said: “We went in July last year and it has taken us July to May to secure the programme.
“Usually, the negotiations with the IMF take time. In fact, the 10 months which have been involved in the Ghanaian programme is one of the fastest on record.
“There is a whole lot of stuff that you had to go through in terms of change of data, negotiations, and making sure that the macro indices you are looking for are in the right direction. All of these may take time, Nevertheless, it is over.
“Now we believe that it is going to provide us with the foundation for redirecting the economy, repositioning the Ghanaian economy firstly, to regain the macro stability that has been lost, secondly, to be able to have better control over important details like the interest rate, inflation and then finally, also to position us to be able to be back to the international capital market which has been a source of funding for us for the first three or four years of our government.
Asked when the country would get back to the capital market, he said “There is no rush to get back but nevertheless, why can we not take advantage of global savings and make some, it makes a lot of sense to do that.
“What the Finance Minister said was that we are going to try as much as possible to maintain the discipline which is required, which is the most important prerequisite of a successful programme. That will mean ramping up our own domestic savings, being able to put systematic control of our public expenditure to make sure that we are always cutting our coat according to our cloth and giving the impetus to private sector investment. We are looking at that more than we are looking for assistance from the multilateral.”
Finance Minister Ken Ofori-Atta earlier indicated that there was no rush on the part of the government to return to the international capital market to borrow following the coming on board the $3billion bailout from the Fund.
He said during a joint Ghana-IMF press conference in Washington on Thursday, May 18 when asked a question about Ghana returning to the capital market that “In addition to the revenue measures that we saw in the budget that are improving at GRA and that will give us the resource to move forward, curtailing and managing our expenditures are going to be important.
“There is no rush in going back to the international capital market, our expectation is that in managing our expenditure and increasing our revenue we will have the resources to do it. Working towards the capital market is important because we want to get our ratings up and make the country more attractive for investors, especially FDIs. So no one is rushing to the capital market at this juncture.”
The Board of the Fund unanimously approved Ghana’s bailout on Wednesday, May 17 at a meeting in Washington after Ghana secured the Paris Club financing assurance on Friday, May 12.