CEPA kicks against debt ceiling
The Center for Policy Analysis (CEPA) has kicked against suggestions from a section of policy analysts and civil society groups that Parliament should consider placing a ceiling on government borrowing, describing it as “an intention of the conservatives.”
The center has meanwhile called on the government to be responsible in its borrowing “to finance projects that will engineer investment and inure to job creation rather than borrowing to finance projects that do not generate revenue.”
The Executive Director of CEPA, Dr Joe Abbey, told the Daily Graphic on phone that any attempt “to place a ceiling on government borrowing will mean limiting public spending,” an action he said could consequently limit development and slow down economic growth in the long run.
Some policy watchers, economists and civil society groups had earlier suggested that Parliament should consider passing a bill that will put a ceiling on government borrowing and consequently do same to national debt, a suggestion they predicated on the country’s rising debt stock.
Ghana’s public debt increased from $11.2 billion in September 2010 (representing 37.8 per cent of GDP) to $14.8 billion (representing 39.0 per cent GDP) in September 2011.
Some policy watchers and civil society groups therefore fear the figure could surge, especially now that the country is entering an election year due to the tendency of the government to scale up spending in order to meet election promises.
One such group, the Progressive Nationalist Forum (PNF), requested Parliament to “as a matter of urgency consider a debt ceiling for the government” citing the government’s rising expenditure.
The Executive Director, however, disagreed. To him efforts to limit government borrowing by imposing a ceiling on public debt will have ripple effects on infrastructural development and economic growth in general.
“It is only the conservatives who think that government spending should be regulated by imposing a ceiling on borrowing and public debt,” Dr Abbey said such a move would prevent the government from embarking on projects that it lacked finances to undertake.
“Using debt ceiling as an instrument to curtail public spending is not the best, it slows down project financing in the long run and that consequently compresses the government expenditure which is not the best for an economy like ours.’’
“If you impose a limit on government borrowing, then laudable expenditures that the government will not get revenues to finance will not be embarked on and that is not good for the country,” he said.
That notwithstanding, Dr Abbey said “we Ghanaians would now have to be more vigilant, especially when it comes to contracting loans.
“We have to make sure that the loans they are contracting will be used to finance investment related projects that will generate revenue to finance the loan and not to be used to pay salaries and the likes,” he added.
He said current developments in Europe and the globe in general necessitated that Ghanaians gathered the courage and vigilance to question their leaders when it came to contracting loans.
“We should not only be happy that the government is contracting loans to build roads, schools and the rest. We should be bold enough to question our government that ‘yes, we need this road but how about the other road that was started and has not been completed,” Dr Abbey added.
He thus called on the government to focus on using loans contracted to finance growth related ventures such as opening up the economy for job creation, private sector growth and stimulating investment rather than engaging in activities that are one time investments and can therefore not refinance the loans by themselves.
Source: Daily Graphic