The Executive Director of the Institute for Fiscal Studies (IFS), Professor Newman Kusi has asked government to establish an independent Debt Audit Commission to undertake a public debt audit.
Speaking at a roundtable discussion on Ghana’s Public Debt, Prof. Kusi explained that, “because we don’t know what the borrowed monies were used for, we need to have a debit audit.”
“So when that audit is done we would be able to know and understand how much was borrowed, what it was used for and what is left, if any,” he added.
Kusi recommended that, this commission should be made up of domestic and international experts who would be given access to all the information needed to undertake the audit as well as analyzing all the terms of loans and their costs and benefits.
The Debt Audit Commission should be able to propose new accountability mechanisms for government and lenders to ensure that loans contracted are productively utilized.
“There should also be agencies like ESLA Plc. that the government established, so that they oversee the management of the country’s debt,” he said.
In recent years Ghana’s public debt situation has seriously worsened as it now faces a high risk of debt distress and increased overall debt vulnerability.
Total public debt-GDP ratio dropped sharply from 113.1 percent in 2000 to 26.2 percent in 2006 driven by HIPC and MDRI reliefs. By the end of 2016, the debt-GDP ratio had risen to 73.3 percent, and moving towards the ratios recorded in the pre-HIPC period.
To date, the country has borrowed about GHS 138 billion.
As a result, total public debt service-to-revenue ratio has not only assumed a rapidly increasing path but has breached its indicative long term threshold.
The country debt servicing now absorbs a large part of domestic revenue, leaving the country vulnerable to shocks.
The country has further fallen into a debt trap as real interest rates continue to surpass GDP growth rates, which has forced it to continue committing more of its tax revenue to service debts.
According to Fitch Rating Agency, Ghana’s interest burden as at 2015 was the highest amongst its peers in sub-Saharan Africa, both as a percentage of GDP and as a percentage of tax revenue, while many analysts described as worrying the escalating interest on the country’s debt.
The Institute recommended the need for a carefully designed fiscal consolidation measures combined with a more ambitious medium-term adjustment to spur robust economic growth and reduce the worsening debt and debt-service indicators.
Kusi further supported suggestions put forward by other civil society organizations on government to strengthen domestic revenue mobilization by increasing tax revenues from large companies and rich individuals, ceasing the granting of tax waiving, and increasing the capacity of the Ghana Revenue Authority to ensure that the existing laws relating to issues such as transfer pricing are fully implemented.
Government should consider requesting support from UNCTAD to organize a debt conference with all its creditors, with the aim of discussing and restructuring the country’s debt and agreeing debt burden sharing and cancellation of unjust debts to bring debt payments down to a sustainable level, he added.
By Joshua W. Amlanu