An Economist and former Board Chairman of the Ghana Revenue Authority (GRA), Professor Stephen Adei has refuted claims that Ghana’s economy is on the verge of collapse.
His comment comes after an economist with the University of Ghana Business School (UGBS), Prof. Godfred Bokpin, warned of a possible collapse of Ghana’s economy.
As the country’s debt stock hits high distress levels, Prof. Bokpin reiterated that the current debt situation could get worse by the end of September if proper interventions are not implemented.
Currently, Ghana’s public debt stock stands at a staggering 341.8 billion Ghana cedis with a corresponding debt to GDP ratio of more than 77% as of September ending 2021.
This means if the country should share this amount across the country’s 30.8 million population, everyone will owe approximately 11,000 Ghana cedis.
In terms of interest payments on our borrowings, Ghana has spent on average 147 billion Ghana cedis, which is 47 billion Ghana cedis more than our projected revenue plus grants for 2022.
In the first quarter of 2022, the government has indicated that it will borrow a total of GHS24.5 billion from the domestic market of which GHS20.7 billion will be used to service existing debt in the local market, leaving the government with just GHS3.8 billion to finance other expenses.
But commenting on the country’s debt stock on Upfront on Joy News, Prof Adei said the economy is not collapsing but “we are in difficult times.”
Although he said the country’s economy is stronger “than the word broke,” Prof. Adei also proposed that the country’s expenditure be reduced.
“If you are exceeding your income, then you must accept to live below your income, which is the easy way, otherwise if you are earning GHC3,000 and you are in debt of GHC10,000 you cannot day to day spend GHC3,000. For you to get out of the rag you will have to cut your expenditure to GHC2,000 because you must service your debt. So we are in that situation as a country,” he said.
He explained that although cutting expenditure might be difficult for the government, especially nearing an election period, that is the right way to go.
“…And they [government] must thank God that this crisis has come now and not 2023, because if they don’t go for the hard one now, which normally will take about 18 months to go over this type of hunch, then they have a good chance by the middle of 2023 to see some good results in 2024. If not, things would get worse and they want to prevent being thrown out of government, they would be thrown out anyway,” he said.