Ofori-Atta: Capping debt not a scientific way to run economy

The Minister for Finance, Ken Ofori-Atta, says the introduction of a debt ceiling to cap the borrowing of government is not a scientific approach to growing the economy.

He said managing the debt situation of every country was situated within the context of how certain variables such as revenue capacity and expenditure were well managed and not necessarily, the debt ceiling.

Ghana, he, therefore, said was guided by a fiscal responsibility act of maintaining a positive primary balance and ensuring that the deficit remained under 5%.

“Truly, as your gross domestic product (GDP) grows, your capacity to absorb more debt is higher…,” he said.
He made the remarks at a press briefing in Accra when asked about the possibility of creating a debt ceiling as the current debt to GDP ratio, as at the end of November 2021, was 78.4%.

The minister indicated that the government in the budget intended to adopt prudent fiscal measures, which would see a reduction in wastage and manage expenditure against revenue inflow in accordance with Section 25 of the Public Financial Management Act (PFMA).

“The quarterly expenditure ceilings of the approved budget will include up to a 20% downward adjustment, beginning in the first quarter of 2022, in commitments across the board for all covered entities benefiting from the 2022 Budget, subject to revenue performance,” he said.

The cost of saving lives and livelihoods of Ghanaians because of the devastating impact of the COVID-19 pandemic, he said, forced the government to incur unplanned COVID-related expenditures.

“This compounded our already stretched finances, from having had to undertake the financial sector clean-up (GHC21.6 billion) and payments to IPP, fuel suppliers and energy sector, SOEs of GHC 26. 4 billion as of 10 November 2021,” he said.

“It has, therefore, become the responsibility of all citizens to ensure that the debt situation is improved as the government works to create enabling environment for more jobs and better infrastructure.”

He said the Electronic-Levy was key in ensuring that the government was able to generate enough revenue to meet its obligations towards the citizens.