Director for the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, has reiterated the need for government to desist from excessive borrowing particularly during the Covid era.
Speaking at the 4th edition of Media General’s Economic Dialogue series on the theme: Ghana’s Recovery Path in 2021 – Balancing Fiscal Consolidation With Growth Policies, Prof Quartey stated borrowing from international capital markets during the pandemic will only result in the country being ‘punished’ with high interest rates.
Prof Quartey opined that borrowings by government should be replaced with an aggressive approach in revenue mobilization efforts.
“This is not the time to be borrowing, because the market will punish you, government has to boost its domestic revenue mobilisation efforts in order to have the needed fiscal resources to run the country [sic],” he said.
Prof Quartey’s view of being charged high interests on loans taken from the international capital market is shared by senior economist lecturer at the University of Ghana (UG), Dr Lord Mensah.
His assertion follows the successful issuance of Ghana’s $3 billion Eurobond just this week which was oversubscribed two times.
The debt issuance comprised of four tranches – $525 million 4-Year Zero Coupon, $1 billion 7-year Weighted Average Life (WAL) priced at 7.75%, $1 billion 12-year WAL at 8.625% and $500 million 20-year WAL with a coupon of 8.875%.
Funds raised from the issuance is expected to be used to finance the budget deficit as well as conduct liability management on both earlier issued external and domestic bonds.
Prof Quartey, has on several platforms advocated for effective tax administration systems, minimum human interaction in the country’s tax collection system and the automation of tax collections among others to ramp up tax revenue for government.
Close to 45 percent of Ghana’s total tax revenue is reserved for the payment of interests on loans with the remaining used for the payment of wages and compensation which is usually insufficient, hence government has to go and borrow to finance wages and compensations and its programmes to be executed for the fiscal year.